Palantir (PLTR +1.25%) has been on fire over the past years, but volatility has been prevalent. The data analytics and artificial intelligence (AI) specialist has generated stock price gains of 1,730% over the past three years, but has fallen by at least 20% at least 10 times. There's more. During the two years between early 2021 and early 2023, Palantir stock plummeted more than 80% -- so it isn't for the squeamish.
The stock currently trades for an eye-popping 241 times earnings and 115 times forward earnings (as of this writing), yet one Wall Street analyst calls Palantir "extraordinary."
Image source: The Motley Fool.
Citi says Palantir stock is a buy
Citi analyst Tyler Radke recently made a splash, maintaining a buy rating and raising his price target on Palantir stock to a Street-high $260. For those keeping score at home, this represents potential gains for investors of 70% compared to Thursday's closing price. The analyst cites Palantir's strong results and relentless growth as the basis for his bullish stance.
Radke points out that "These revisions mark some of the strongest at scale we've seen in enterprise software." He goes on to say that "Palantir's momentum increasingly stands out in a software market where accelerating growth stories are rare."
I think the analyst hit the nail on the head. In the fourth quarter, Palantir's revenue grew 70% year over year, but this belies the underlying strength of the business. The U.S. commercial segment -- which includes the company's Artificial Intelligence Platform (AIP) -- surged 137% year over year and 28% sequentially, representing 36% of Palantir's total revenue. AIP is attracting not only enterprise customers but also government agencies.
Equally as impressive is the company's remaining performance obligation (RPO) -- contractually obligated sales not yet included in revenue -- which surged 143% to $4.2 billion, adding $1.6 billion in the fourth quarter alone. This gives the company a solid foundation for future growth.
NASDAQ: PLTR
Key Data Points
There's more. Management provided a bullish forecast for 2026 and is now guiding for full-year revenue growth of 60% to roughly $7.19 billion, while calling for U.S. commercial revenue to grow at least 115% to $3.14 billion.
As I pointed out earlier, this stock is volatile and not for the faint of heart. For investors with a cast-iron constitution seeking a high-risk, high-reward stock, Palantir might be worth a look. The ongoing adoption of AI and the trend toward defense modernization could be big growth drivers in 2026.
For investors captivated by Palantir's potential but troubled by its lofty valuation, a small position can be one way to ease into a stake without betting the farm. Additionally, dollar-cost averaging is another option for building a stake over time, as it adds fewer shares when the price is high and more when the price is low.
Given its accelerating growth and scaling profits, I believe that Palantir is a buy.
