Palantir (NASDAQ:PLTR) shares have been volatile recently, prone to big swings on account of fast-changing sentiment. The trajectory has been mostly downward – over the past month, the stock has shed 28% amid a broader market decline and a sell-off in frothy software stocks.
More specifically, the stock has been under pressure due to proposed federal spending cuts (e.g., DOGE) and what some view as an unsustainable valuation.
Assessing the situation, Loop Capital analyst Mark Schappel has some advice for investors concerned about the downturn.
“Quality matters during periods of market stress, which means investors should focus on firms that are category leaders, have strong competitive standings, have solid margins and margin expansion stories in place, and are consistent cash generators with strong balance sheets. PLTR clearly fits the bill here,” the analyst opined.
Schappel’s comments come in the wake of a meeting with Palantir’s CFO David Glazer and other members of his team, where the analyst had the chance to see a demo of Palantir’s AIP data platform. AIP integrates large language models with datasets in Foundry, allowing for AI integration into enterprise workflows, the creation of data-driven solutions, and AI-assisted decision-making.
“We were impressed with the product’s modern user interface (simplicity, screen layout), customization, and flexibility, all of which appeal to end users,” said Schappel.
The analyst also gained a “hands-on view and understanding” of Palantir’s Ontology. Ontology is sort of a digital map that organizes an organization’s knowledge and processes. It sits on top of datasets, bridging the gap between complex database structures and the way end users expect to see business concepts. “The key takeaway here is that Palantir’s Ontology is well-differentiated, and AIP’s slick UI and deep capabilities essentially sell themselves, supporting our view that Palantir is setting the agenda in enterprise AI,” the analyst further said.
Palantir’s distinctive AIP “bootcamp” go-to-market strategy was also on the agenda. This unique sales method features 5-day bootcamps that assist potential customers in applying Palantir’s AI products to address real-world use cases, helping transition small-scale pilots into full production. “We believe PLTR’s boot camp strategy is highly effective, evidenced by competing enterprise software vendors (e.g., Snowflake) that recently adopted the sales approach,” Schappel commented on this matter.
The CFO also pointed out that Palantir’s main competition comes from in-house development efforts and large systems integrators creating custom AI solutions at “an eye-popping price.” Palantir’s sales approach focuses on developing AI solutions using its proven platforms (AIP, Gotham, Foundry) and pricing them based on value, often at a fraction of the cost of large consulting firms’ proposals.
Bottom line, Schappel rates PLTR shares a Buy, although due to the recent “multiple compression” in enterprise software, he lowered his price target from $141 to $125. Nevertheless, that’s still a Street-high target and offers a one-year upside of 45%. (To watch Schappel’s track record, click here)
Most analysts, though, aren’t quite as enthusiastic. With 10 Holds, 4 Buys, and 4 Sells, the consensus rating lands at Hold (i.e., Neutral). The average price target of $94.27 suggests a more modest 9% gain in the coming year. (See PLTR stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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