Data mining software company Palantir Technologies is popular among retail investors, but Bank of America said it is still poorly understood by many on Wall Street.
In a note released Tuesday, analysts noted that 1980 estimates of cell phone users by the year 2000 were just 900,000. The actual number of cell phone subscribers that year was more than 100 million. At the same time, such early forecasts also failed to anticipate the rise of mobile apps and smart devices.
“We see Palantir’s (PLTR) capabilities, technology, and future trajectory facing a similar fundamental misunderstanding,” wrote Bank of America analysts led by Mariana Perez-Mora. “The upcoming inclusion in the S&P 500 provides a watershed moment for institutional investors to rethink what they “know” about PLTR.”
Bank of America reiterated its buy rating on Palantir shares and raised its price target to $50 from $30. The new target represents a 40.5% upside from the stock’s closing price on Friday. It comes after shares had already surged on news last week that the company would join the S&P 500 later this month and have more than doubled in the year to date.
The main misunderstanding on Wall Street concerns Palantir’s unconventional sales strategy, in which engineers play a key role. While investors have said the approach limits scalability and profitability, Bank of America disagrees.
“We believe this approach makes PLTR’s solutions significantly more user-friendly and gives PLTR stronger pricing power,” the memo reads. “Engineers create an intimate relationship with the customer’s mission and help shape the product to add real value.”
Meanwhile, as Palantir gains more clients in the public and private sectors, Bank of America sees a huge opportunity for the company to become the common data operating system for the U.S. government and major U.S. corporations.
Palantir is best known for its work in defense and intelligence but has also expanded into the commercial space.
To celebrate Palantir’s inclusion in the S&P 500, CEO Alex Karp took a victory lap in Video posted on TuesdayHe also pointed to Wall Street misconceptions about the company, which developed and introduced products a decade before its competitors, allowing entire organizations to use AI and large language models.
“This is still so radical that people can’t quite wrap their heads around it,” Karp says. “They don’t understand how we were able to turn around and become profitable on a GAAP basis. And go from what the big boys, the professional managers, and some analysts saw as a Frankenstein’s monster with a freak show leader—me—to a dynamic, clearly profitable company that deserves to be on the S&P 500.”
He added that Palantir has charted its own course along the way, ignoring conventional wisdom, while praising the individual investors who have maintained their faith in the company.
“Everyone inside the company and around the world should celebrate the rebels’ victory,” he said.
“Devoted student. Bacon advocate. Beer scholar. Troublemaker. Falls down a lot. Typical coffee enthusiast.”