Palantir stock investors just got great news from the Wall Street analyst who predicted the Nasdaq’s rise to 20,000

Dan Ives is the global head of technology research at Wedbush Securities. During his two-decade career in the technology sector, Ives has made several big, bullish predictions that challenged the prevailing sentiment on Wall Street.

For example, in January 2024 he predicted that Nasdaq Composite would reach 20,000 this year. Lo and behold, the index crossed that threshold last week. But Ives made perhaps his boldest call yet during an interview with Schwab Network last month.

He argued that Wall Street is dramatically underestimating the magnitude Palantir Technologies (PLTR 3.92%) will benefit from companies’ spending on artificial intelligence. Ives believes Palantir could eventually reach a market value of $1 trillion. This represents an increase of approximately 490% over the current market value of $170 billion.

Here’s what investors should know about Palantir:

Palantir has quietly become a leader in artificial intelligence software

Palantir began developing data analysis software for the U.S. intelligence community about two decades ago and later expanded into the commercial sector. Its core products, Gotham and Foundry, serve as core operating systems that connect complex information with an ontology (a digital representation of real-world objects) to facilitate analysis and improve decision-making.

However, it was the launch of the artificial intelligence (AI) platform, AIP, in 2023 that truly transformed the company. AIP integrates large language models into Gotham and Foundry, enabling customers to apply generative AI to their operations. Dan Ives has called AIP a “launching pad for AI use cases,” and other analysts have also praised the product.

Above all, Forrester Research Earlier this year, AIP was named the best artificial intelligence and machine learning platform on the market, receiving higher ratings than similar tools from Microsoft And alphabet. Similarly, Dresner Advisory Services ranked Palantir as one of two top vendors in its 2024 Artificial Intelligence, Data Science and Machine Learning Software Market Study.

However, not all analysts are so impressed. Gardener Palantir performed worse than a dozen other vendors in data integration capabilities and didn’t even recognize Palantir in its latest data science and machine learning report. The different opinions about the company are also reflected in the price targets of Wall Street analysts, which range from $11 to $75 per share.

Palantir continued to deliver high levels of performance in the third quarter

Palantir reported encouraging third-quarter financial results. The company increased its customer count by 39% to 629, and the average existing customer spent 18% more. In turn, revenue rose 30% to $726 million, the fifth consecutive acceleration in revenue growth, and non-GAAP net income rose 42% to $0.10 per diluted share. Management attributed the strong numbers to continued demand for AIP.

Below are additional highlights from the third quarter:

• Government revenue rose 33% in the third quarter, the fastest growth rate in about four years. The company also won a $100 million contract to expand access to its Maven Smart System to more military personnel.
• The number of commercial customers rose 51% last year as demand for AIP attracted more companies to Palantir, and commercial revenue rose 27% in the third quarter.

Additionally, Palantir has made some important announcements since the end of the quarter. The company was awarded a $37 million contract and became the lead software integrator for the US Special Operations Command. Palantir also received FedRAMP High Authorization, meaning its entire product offering can be used by the U.S. government to process sensitive, unclassified workloads. This could lead to more robust growth in the government segment.

Image source: Getty Images.

Not a single analyst (including Ives) sees upside potential for Palantir stock over the next 12 months

In summary, Palantir is performing well in its commercial and government segments, driven in large part by demand for AIP. That certainly makes the business attractive, but the stock is a different story. Wall Street expects Palantir’s adjusted earnings to rise 25% annually through 2027. This consensus makes the current valuation of 215 times adjusted earnings seem absurd.

I’m not sure what Ives would say about that. On the one hand, he sees a path to a trillion-dollar market value for Palantir. On the other hand, its 12-month price target of $75 per share implies a downside of 1%. With that in mind, Ives has the highest target on Wall Street, meaning literally every analyst who follows Palantir expects the stock to decline over the next 12 months. Admittedly, some analysts may raise their forecasts with Palantir joining the Nasdaq-100.

Here’s the big picture: Ives has made countless good decisions throughout his career, and I wouldn’t bet against him. My advice to investors who (like me) feel uneasy about buying Palantir at its current price: keep Palantir on your watchlist and look for opportunities to buy the stock on dips. If Ives is right in believing that Palantir could be a trillion-dollar company (or even a $500 billion company), there is still plenty of time to build a position. Don’t let the fear of missing out confuse the decision-making process.