Palantir's stock looks less 'frothy' and is now worth buying, this analyst says

By Christine Ji

One analyst sees a path to $200, as Palantir's new government contracts and expanding margins could help the stock rebound

Palantir, headed by CEO Alex Karp, will announce its fourth-quarter earnings results after the bell on Monday.

Even Palantir - a company known for its polarizing high stock valuation - hasn't been able to escape the broader software selloff that's rippled across the market with renewed force this year.

But William Blair analyst Louie DiPalma sees a turnaround on the horizon, as he anticipates the company will be able to widen its artificial-intelligence lead in the coming months.

On Monday, DiPalma upgraded Palantir's stock (PLTR) to outperform from market perform, citing increasing momentum for Palantir's government and commercial businesses that he expects to be on display when the company reports its December-quarter earnings after the bell Monday.

Shares of Palantir have fallen nearly 30% from their closing high achieved in November 2025, partly reflecting concerns that AI vibe-coding offerings will replace traditional enterprise software. But "the recent selloff creates a buying opportunity for Palantir as a leader in the AI supply chain," DiPalma wrote.

DiPalma is anticipating further price volatility surrounding the earnings results, but he expects shares to break $200 within the next 12 months. As of Monday morning, Palantir's stock was trading at $150.37.

See more: This group of tech stocks screams opportunity after a bewildering selloff

According to William Blair's proprietary government-tracker data, the Trump administration is going "all in" with Palantir, which will likely contribute to a "very strong December quarter," DiPalma wrote.

A major catalyst is a $448 million Navy contract for "ShipOS" software designed to optimize submarine supply chains, which William Blair ranked as Palantir's second-largest contract by projected annualized recurring revenue.

"This program ... has the potential to scale to one of Palantir's largest overall contracts," DiPalma noted, suggesting it could eventually lead to major deals across other Defense Department platforms like fighter jets and drones.

DiPalma highlighted another $640 million contract from the National Geospatial-Intelligence Agency called "Glacier Bay." The five-year deal was not formally discussed on earnings calls, likely due to confidentiality, but is expected to contribute to strong government-revenue growth. DiPalma is projecting 31% growth in government revenue for 2026.

On the commercial side, DiPalma estimates that Palantir's private-sector revenue will grow 81% in 2026.

DiPalma anticipates that Palantir's operating margin will increase to 65% from 50% over the next give years and that the company will generate at least $7 billion of free cash flow in 2030.

At 148x forward earnings, Palantir's valuation is still "frothy," but DiPalma believes it now appears "more reasonable relative to recent venture rounds for companies tied to the AI ecosystem."

See more: Why Palantir is the 'exception' as other AI companies struggle to add value

-Christine Ji

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02-02-26 1150ET