Palantir stock: Why this analyst says it's an AI winner
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Brent. It is always great to see you. So let's get right into this Brent. You initiate pound here with an overweight, you're a believer Brent and a new platform powering the AI revolution. You say, just walk us through why this is a Brent buy. How do you explain it to your clients?
Yeah. Most expensive um stock on our coverage list, uh, at 52 week highs. Why are we overweight? Why do we like this business? And I, I think it's important to note that one, our price targets are, are kind of one year out and, and, and two, we, we've seen the stock that, that's acted very volatile, right? Uh, 12 20% to 29% drawdowns over the last 5 years. Um, you've had the stock down 12% the day after earnings and Q1. But we don't really think that's all that important. What really matters is how big this company can get. And, and that's where we spend a lot of our due diligence and a lot of our time trying to understand what is Palantir, what do they do? Why is it so special? And in the end, uh, we really think this is a secular AI winner. We're going to put it in the same camp as private AI several winners like an anthropic or an open AI for a different reason. And what they do that's special is they really have created a platform that's going to help help people build new AI applications. And the popularity of that is what was
talking to me. We did some due diligence, um, uh, at, uh, in June, we went to a Databricks conference, we went to a SAP Sapphire conference, we're talking standing room only for large enterprise customers that want to do more, learn more, engage with, uh, with Palantir. If you look at Palantir, say 5 years ago, they were competing in some cases with the likes of a Databricks. They were competing in some cases with the likes of Accenture and Deloitte. These companies now have turned from competitors to partners. And so I really think that there is a sea change relative to the opportunity around Palantir. Does that mean the stock is going to go straight up from here? Probably not. There's going to be volatility. There's going to be lots of opportunities to get involved here, but we do think this is going to be one of the key app platforms. It's addressing two trillion dollar separate uh, distinct markets, common platform, common or shared R&D, but two really big secular opportunities in defense and uh, enterprise.
The pushback as you well know, Brent. I, I want to get your thoughts on this has been on valuation. Um, you know, I talked to Brent Till over at Jeffries and you know Brent, smart guy like yourself. And I remember Brent telling me, listen, he likes the company and he likes the technology and listen, the fundamentals he says look solid. But I think he actually referred to it as an irrational valuation. It, it's just too pricey, he said, which is why he has the equivalent of a cell on it. How do you respond to that Brent?
Listen, there's no doubt this is a very, very richly valued company. It's the most highly valued company in the space. And so what you have to underwrite is the long term. And the long term isn't a straight line up. There's variances and that's what we're kind of betting on. Is you're going to get a chance to buy the stock lower, but it should be a stock that you can buy. Um, this is a company now that is uh, top 25 waiting in the S&P 500. So one way to cheat is you can buy the index and take a small ownership stake in, in Palantir without taking that valuation risk, right? Company specific risk. So if you own the index, that's me 500 index, you own a little bit of Palantir. Our view is the next year, there will be opportunities, there'll be buying opportunities, be patient. Uh, but this has the potential we think uh, to be a AI secular winner, it'd be one of the key platforms. We're talking about a sector looking at cloud software where there are zero, 0 30% public growers next year. Um, we think Palantir can be in a, in a universe of one. So yes, we're trading this a little differently. We're looking kind of at the lens of what could this be worth? What's the art of the possible? Uh, if you're not comfortable with looking out 5 or 10 years, it's going to be really hard to justify evaluation on this one.
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