It’s been another spectacular past year for shares of Palantir (NASDAQ:PLTR), which are now up a mouth-watering 418%. Undoubtedly, the fast-moving AI software firm may have captured the attention of the meme stock crowd, and while it continues to be difficult to value the hyper-growth company on the basis of price-to-earnings (P/E) or any other traditional valuation metric for that matter (shares trade at 675 times trailing P/E or so at the time of writing), the growth ceiling may very well be high enough to justify buying a stock that’s already scaled to profound heights.
Indeed, every several percentage points that the shares of the government contractor climb, the higher the expectations of investors and analysts are going to be. Looking at the stock chart alone, there’s no denying just how “bubbly” the name looks at current levels.
Still, there is a bull (and base) case that some very smart Wall Street veterans are still upbeat about, even at today’s lofty valuations. Perhaps the most notable name in the bull crowd is Wedbush Securities’ Dan Ives (yes, he’s back with another price target hike!), who isn’t ready to throw in the towel on the $350 billion company after its latest leg higher. In fact, he believes the firm is well on its way to becoming the next Oracle (NASDAQ:ORCL) as the AI boom progresses.
Could Palantir stock really be “the next Oracle?” This bullish Wall Street analyst certainly seems to think so.
Just over a week ago, Ives hiked his PLTR stock price target by $20 to $160. So, what’s this Wall Street pro’s bull thesis on the name now that expectations have shot up through the roof?
He likes the firm’s AI strategy, which he views as the “golden path” to becoming “the next Oracle.” Indeed, it’s a bit difficult to imagine that analysts on Wall Street will need to return to the drawing board again to upgrade the stock after a sudden, explosive upside move.
Personally, I’m inclined to treat Palantir as more of a buy on a pullback, especially since Ives’ price target only implies just north of 7% in upside from Tuesday’s closing price. Given the modest single-digit gain expectation and the massive rally that’s in the rearview, I see no rush to jump into the stock right here, even if you’re keen. Indeed, a few scenarios could play out where the bull case comes to fruition and the stock still gets sent to the penalty box, simply because the name is overbought, overheated, and overdue for a correction.
What about the Palantir AI Platform (AIP)? Demand is still off the charts
It’s so tough to bet against a hyper-growth stock like Palantir when it has such a profound growth driver, like its AI Platform (AIP), up its sleeve. The product has been met with unprecedented demand, and it’s tough to tell when the rapid adoption will begin to slow. Until it does, I think Ives has a very good chance of being proven right for pounding the table so hard on the name that he’s referred to as the “Messi of AI” and, more recently, a firm on track to become “the next Oracle.”
At this juncture, it’s hard to gauge what growth rate AIP will post in future quarters. Indeed, high double-digit growth rates aren’t sustainable over the long haul. But in the face of a generational AI revolution?
There’s a good chance that such growth could stay for several quarters longer or even a few years if most analysts are still understimating the staying power of Palantir’s profound AI tailwind. Add margin expansion potential (Palantir’s operating margins have been on the uptrend of late) and you’ve got a bull case that could make Ives’ latest price target hike seem too conservative.
In short, a bull case may very well play out for Palantir. Arguably, it’s the likeliest case, given the strength of the AI tailwind and the brilliant top boss in CEO Alex Karp, that’s proven himself a visionary leader. Though I could be wrong, I’d much rather wait for those red-hot shares of Palantir to cool off because the latest wave of analyst upgrades, I think, leaves less room for error.
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