Why this new Palantir bull says the stock is worth its hefty price

By Emily Bary

The AI software company has standout margins and revenue growth, the combination of which helps justify a premium price for the shares, according to Truist

Palantir shares have logged triple-digit-percentage annual gains for three years in a row.

Palantir Technologies' stock is notoriously expensive by conventional valuation metrics. But Wall Street's newest bull says it's worth paying a premium to own the stock.

Truist Securities analyst Arvind Ramnani initiated coverage of the stock with a buy rating on Tuesday, praising the company's unique financial profile. He looked at 111 software companies and found that Palantir (PLTR) had the highest margins of the bunch, along with a growth rate that ranked among the top three.

That profile helps justify a forward-price-to-sales ratio upwards of 70, he added.

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Palantir's business has matured and broadened out over the years, fueled by advancements in artificial intelligence. The company is best known for its defense-technology software, but it also enables companies to use AI in a more general sense as they look to do more with their data and speed up manual processes.

Ramnani praised the company's "ideal competitive position" helping customers "adopt AI capabilities and leverage their proprietary data in a secure environment." Customers include AT&T (T), Wendy's (WEN), BP (BP) and Walgreens - signaling breadth that goes well beyond defense tech.

Palantir's AI momentum has dramatically accelerated the company's revenue growth rates relative to what they were in mid-2023, and Ramnani sees room for the company to further expand business opportunities within its existing customer base as well as with new clients.

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The company's total addressable market was perhaps $119 billion when the company held its 2020 direct listing, and Palantir commanded an estimated 0.9% of it. Now the market opportunity has nearly tripled, according to Ramnani, with Palantir's penetration at an estimated 1.3%.

Financials have improved as well. The company now sports a free-cash-flow margin north of 40%, Ramnani noted, putting it in a position to "significantly increase capital returns over the long time," presumably through buybacks that could help offset the dilution stemming from stock-based compensation.

Palantir shares are up fractionally in Monday's premarket action. They're coming off their third year in a row of triple-digit gains, after rising 135% over the course of 2025.

Read: They bet everything on Palantir and became millionaires. Inside the market's ultimate cult stock.

-Emily Bary

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01-06-26 0912ET