Palantir Technologies' prowess in artificial intelligence and national security focus bodes well for the enterprise software maker despite this year's sell-off, says Bank of America. PLTR stock climbed on Tuesday.
Palantir stock rose 5.7% to close at 8.71 on the stock market today.
BofA analyst Mariana Mora initiated coverage of PLTR stock with a buy rating and price target of 13.
"We see Palantir as a beneficiary of rapidly growing demand for AI-platforms in both commercial and government end-markets," Mora said in a note to clients. "Palantir's dominant position in the AI-powered software market, differentiated end-to-end and highly-secure solutions and first-mover advantages should support more than 30% annual revenue expansion and improving profits in the midterm."
PLTR Stock Was Down 55% For 2022
Meanwhile, Palantir stock had dived nearly 55% in 2022 as of Friday's market close. A software benchmark, the iShares Expanded Tech-Software ETF, has contracted 34% in 2022.
Software growth stocks that traded at the highest multiples of forward-looking revenue, such as Palantir, have been the hardest hit.
"Year to date, Palantir continues to derate, in line with the software peer group, as rising inflation and interest rate concerns impact high-multiple stocks," said Mora.
She added, "We think PLTR stock has not benefited from the recent defense re-rating despite significant U.S. national security exposure. We expect U.S. and allies' defense budgets to grow with increased focus on modernization. Data is a strategic asset and national security agencies have to make sure they operationalize it securely to better defend from near peer threats like Russia or China."
Palantir Trying To Grow Commercial Base
Palantir sells data analytics software primarily to U.S. government agencies. In addition, Palantir's software is also used for intelligence gathering, counterterrorism and military purposes.
The Denver-based company has been aiming to grow its commercial customer base by expanding into the health care, energy and manufacturing sectors.
Aiming to boost commercial revenue growth, Palantir has been investing in special purpose acquisition companies. SPACs raise money in an initial public offering with the purpose of making acquisitions.
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