Palantir stock salutes US Army contract
Shares of defense-software contractor and data-mining firm Palantir Technologies are enjoying a bounce on Thursday after announcing a contract extension with the US Army. The stock’s roughly 340% rise this year makes it the best performer in the S&P 500, but the rally has raised levels of valuation to territory that’s pretty tough to justify on any traditional analytic grounds.
In fact, UBS analysts initiated coverage of the shares on Wednesday, at a 12-month price target of $80 a share, but with a neutral rating, largely driven by concern about the company’s nosebleed valuations (which we’ve spotlighted before).
UBS analysts wrote:
“While we certainly understand that valuation isn’t straightforward for stocks that are well-positioned into large tech paradigm shifts (in this case AI-Data), that are accelerating and for which an improving narrative can make the revs/FCF multiple less important. In our view Palantir deserves a material multiple premium to most/all other public software firms. That said, 49x revs and 124x FCF on 2025 estimates was simply too high a hurdle to get over, and we don’t mind staying patient for a better entry point.”
In fact, UBS analysts initiated coverage of the shares on Wednesday, at a 12-month price target of $80 a share, but with a neutral rating, largely driven by concern about the company’s nosebleed valuations (which we’ve spotlighted before).
UBS analysts wrote:
“While we certainly understand that valuation isn’t straightforward for stocks that are well-positioned into large tech paradigm shifts (in this case AI-Data), that are accelerating and for which an improving narrative can make the revs/FCF multiple less important. In our view Palantir deserves a material multiple premium to most/all other public software firms. That said, 49x revs and 124x FCF on 2025 estimates was simply too high a hurdle to get over, and we don’t mind staying patient for a better entry point.”
