What happened
Palantir Technologies (PLTR 3.19%) jumped nearly 6% on Tuesday following bullish analyst commentary.
So what
Bank of America analyst Mariana Perez Mora placed a buy rating on Palantir's stock. She sees the software maker's shares climbing roughly 49% to $13.
Perez Mora believes Palantir gives investors a way to profit from the booming demand for artificial intelligence (AI) solutions. She sees a rising need for AI-powered tools in both Palantir's core government market and the rapidly expanding commercial market. Together, these opportunities should allow the data analytics leader to achieve its goal of at least 30% annualized revenue growth in the coming years, according to Perez Mora.
Now what
Like many high-growth software stocks, Palantir's shares have been hit hard by fears of inflation and surging interest rates, which have driven traders to seek shelter in more defensive investments. But Perez Mora expects investors to begin to value Palantir more highly due to its growing military-related business.
That, combined with higher projected sales from increased defense spending by the U.S. and its allies, should help to drive Palantir's stock price sharply higher in the year ahead, she argues. "Data is a strategic asset and national security agencies have to make sure they operationalize it securely to better defend from near-peer threats," Perez Mora said.
At the same time, Palantir is diversifying its business by expanding its non-government operations. Palantir's commercial revenue soared 54% year over year in the first quarter, including a 136% surge in the U.S.
