On Tuesday, BofA Securities adjusted its outlook on Palantir Technologies Inc . (NYSE: NYSE:PLTR), increasing the company's price target to $30.00, up from the previous $28.00, while keeping a Buy rating on the stock. The firm drew parallels between the current market sentiment towards artificial intelligence (AI) and the historical California gold rush.
They noted that, similar to the gold rush, the initial fervor surrounding AI has begun to wane, with many companies that touted AI capabilities experiencing a decline in their stock multiples. This observation comes in the wake of a market downturn on Monday that saw the S&P 500 index fall by 3% and the VIX—a measure of market volatility—surpass 60.
BofA Securities highlighted that during the gold rush, the most successful were not the gold miners but the entrepreneurs who provided them with tools and supplies. In the context of the AI industry, Palantir is seen as akin to these essential suppliers, maintaining a strong position even as interest from "AI tourists" fades. The firm's stance is based on Palantir's continued resilience and role as a 'digital axe supplier' in the market.
The firm's decision to raise Palantir's price target is also informed by the company's performance, which has surpassed expectations. Palantir has demonstrated strong momentum in both its U.S. commercial and government sectors, leading BofA Securities to update its estimates for the company's future financial performance.
In their statement, BofA Securities reiterated their confidence in Palantir by maintaining a Buy rating. They emphasized the company's robust standing and potential for growth, which supports the revised price objective from $28 to $30. This adjustment reflects BofA Securities' positive outlook on Palantir's prospects amid a challenging environment for AI-centric businesses.
In other recent news, Palantir Technologies Inc. reported a substantial growth in its second-quarter fiscal year 2024 earnings, with total revenue reaching $678.1 million, marking a 27% year-over-year increase. This success is attributed to high demand for the company's AI solutions in commercial and government sectors. The U.S. commercial segment grew by 70% year-over-year, while government revenue increased by 23% year-over-year to $371 million.
However, William Blair maintained an Underperform rating on Palantir, indicating a bearish outlook on the stock's performance. The firm anticipates a potential decline of over 20% in Palantir shares over the next year, attributing this to a significant disparity in market capitalization between Palantir and its peer Snowflake (NYSE:SNOW).
Wedbush, on the other hand, has shown confidence in Palantir's growth trajectory, raising its price target on the company's shares to $38.00. Palantir also launched a new initiative, Warp Speed, aimed at revolutionizing American manufacturing. These recent developments have led to Palantir raising its full-year revenue guidance to $2.746 billion.
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