Palantir Technologies (PLTR +4.56%) is among the most popular investments in artificial intelligence (AI) that anyone can make, thanks to its dominant platform and emerging agentic AI service. It's rapidly growing and has some Wall Street analysts placing lofty price targets on its stock.
The most aggressive is Dan Ives from Wedbush, who has a one-year price target of $230 per share. With Palantir now trading for about $150, that's more than a 50% upside on a stock that has already delivered monster returns. So, can Palantir hit $230? Let's take a look to find out.
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The business is thriving
Palantir has been growing at a rate that few companies can match. During the fourth quarter, its commercial revenue increased by 82% year over year to $677 million. In particular, U.S. commercial sales saw the most strength at 137% growth. But the majority of its revenue comes from government business.
The company's software was originally intended to assist government intelligence agencies in aggregating information and give the military the best information possible in a split second to make a decision. Palantir has expanded onto the commercial side, but its government business has remained a staple. In the fourth quarter, its government revenue rose by 60% year over year to $730 million.
NASDAQ: PLTR
Key Data Points
While commercial revenue may be growing faster, government revenue still makes up the bulk of the company's total. For the first quarter, I would expect the latter to increase rapidly, thanks to the significant U.S. military operations in Iran.
This is reflected in Palantir's expected financial performance, as Wall Street analysts believe it will grow its revenue by 74% to $1.54 billion -- above the guidance management gave investors last quarter. There's no guarantee that Palantir will actually be able to deliver on that much sales growth, even given everything that's happening in the Middle East. But even if it does, will that level of revenue be enough to push Palantir above $230 per share?
The stock has a lot of growth priced into it
I think it's pretty much a given that the company will have another banner year in 2026. The problem is, all of that success is already priced into the stock.
PLTR PE Ratio (Forward) data by YCharts; PE = price earnings.
Currently, Palantir trades for 235 times trailing earnings and 112 times forward earnings, indicating that Wall Street believes it will double its earnings this year. If it achieves that and trades for over 100 times earnings at the end of this year, it would still be an expensive stock. A more reasonable valuation would be something in the range of 30 to 40 times trailing earnings.
So even if the company does double its earnings again in 2027, it will still be above this valuation mark. This means there are at least two to three years of incredible growth baked into the stock price already.
For Dan Ives' price target to be realized, the market must be willing to price even more years of growth into the stock. Considering that the market's current appetite for AI risk has been dampened, I don't think that's likely to occur. Now, if Palantir continues growing at its current rate throughout 2026 and into 2027, then I could see the stock gaining value and rising, but it may be some time before we see a share price of $230.
There are several other AI stocks that are growing at the same pace as Palantir that trade for a far cheaper price. I think some of these stocks are much better targets for 50% upside or more, and investors should consider buying them instead of Palantir.
