Why Palantir’s AI-Driven Growth Has Divided Analysts on the Stock

Palantir Technologies (PLTR) shares soared in intraday trading Tuesday, a day after the company reported improved financial results, which was driven by “unbridled demand” for its artificial intelligence platform (AIP).

Palantir shares were up more than 11% to $26.79 as of 3 p.m. ET Tuesday, contributing to the stock’s more than 56% gain year to date.

Some analysts raised their price targets for the stock based on the company’s quarterly results. However, others expressed concerns about the sustainability of the recent rally.

Palantir’s ‘game-changing quarter’ prompts some analysts to raise targets

Wedbush analysts raised their price target on the stock from $35 to $38, calling Palantir’s latest update a “game-changing quarter” and calling AIP monetization a “key driver of growth.”

They said Palantir “has seen unprecedented demand for its AI solutions across the commercial and government landscape, leveraging AI solutions that solve significant problems across organizations at enterprise scale.”

Citi analysts said they “expect the stock to trade significantly higher as accelerating revenue and the scale of outperforming sales are particularly impressive amid a volatile software demand environment in the second quarter.”

Others question sustainability

Although Wedbush analysts called the quarter “a quarter that won me over,” analysts at William Blair were less convinced about the company’s ability to sustain its recent growth.

“While the consensus beat is positive, the bar has been consistently set very low,” William Blair analysts said, reiterating a “below expectations” rating for the stock.

Analysts said they “do not believe the company’s commercial momentum in the U.S. is sustainable,” noting that U.S. commercial revenue rose 6% quarter-over-quarter, down from 14% sequential growth in the previous quarter. They added that headwinds related to U.S. government contracts could also be a drag on growth.