What happened
Shares of Palantir Technologies (PLTR 1.10%) rose on Monday, following an analyst upgrade. As of 3:05 p.m. ET, the data analytics company's stock price was up 2% after rising as much as 7.2% earlier in the day.
So what
Morgan Stanley analyst Keith Weiss raised his rating on Palantir's shares from underweight to equal weight. Though he cut his price forecast from $24 to $16 to reflect investors' recent reticence to pay high valuation multiples for tech stocks, his new estimate is still more than 40% higher than Palantir's current price near $11.25.
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Weiss believes Palantir's government operations are well situated for the current geological environment. Recent turmoil in Europe should only boost demand for the company's defense-focused data services.
Additionally, Weiss expects Palantir's efforts to build out its commercial salesforce to bear fruit in the coming years. The software company's commercial revenue jumped 47% year over year in the fourth quarter, including a 132% surge in the U.S.
Moreover, Weiss notes that Palantir's stock is now more attractively priced after its recent swoon, particularly when factoring in its growth rates and cash flow production. In turn, he believes that many of the risks inherent in an investment in Palantir are already reflected in its share price.
Still, Weiss would like to see more stability in Palantir's operating margins and evidence of stronger growth in its government and commercial segments before upgrading the stock to an overweight rating.
Now what
Even after today's gains, Palantir's stock price is down about 38% so far this year. Although its shares aren't cheap at roughly 60 times analysts' earnings estimates for 2022, they are now much more reasonable, especially when considering Palantir's greater than 40% projected growth rate over the next five years.
