From AI Experiments to Implementation: Why Does JPMorgan Expect Palantir's Stock to Rise 33%?

Shares of Palantir Technologies, an AI-based software developer, are underperforming the market—after rising more than 130% last year, they have gained only about 5% so far this year. However, JPMorgan recommends buying the stock—it expects the shares to rise 33% by the end of next year.

JPMorgan analyst Brian Essex initiated coverage of Pentagon contractor Palantir with an “outperform” rating—equivalent to a buy recommendation—and a price target of $262 for December 2027, according to Barron’s. This implies a 33% increase from the closing price on October 29. Essex added the company’s stock to the Positive Catalyst Watch list—a list of stocks for which the bank expects positive momentum amid upcoming events.

According to the analyst, Palantir is in a particularly advantageous position as corporate clients transition from experimenting with artificial intelligence to putting it into practical use. Companies are increasingly demanding that investments in AI yield measurable financial returns, and Palantir is already able to deliver them thanks to its platform, which enables customers to restructure their business processes, Essex explains.

“We are moving from a year in which companies were just trying to figure out how to implement the most transformative technology we’ve ever seen to a year in which they are beginning to seek a return on those investments. Palantir is already delivering a return on investment by using its platform to fundamentally transform its clients’ business processes, and its growth is accelerating,” Essex wrote. “Palantir takes AI beyond simply automating processes that were previously performed by humans. AI has the power to transform entire business operating models, and that is precisely the value Palantir offers its clients.”

The analyst is not concerned about Palantir's high stock price, even though its forward P/E ratio—which measures market capitalization relative to expected annual earnings—stands at 89.4, compared to 18.9 for the S&P 500 index. “The company’s valuation appears justified, given the unique combination of extremely high growth rates and profitability in its business, as well as significant potential for further growth driven by radical changes in the key market segments in which it operates,” Essex emphasized.

Palantir will release its quarterly earnings report on November 2. Morgan Stanley analysts Adam Wood and Sanjit Singh noted in a research note published Thursday that their data suggests Palantir is likely to exceed third-quarter revenue forecasts, according to Barron’s. In their view, the company’s strong business momentum should continue. “Our checks indicate sustained demand with virtually no signs of intensifying competition,” Wood and Singh wrote.

Morgan Stanley maintains a neutral rating on Palantir shares with a price target of $205.

On October 27, Rosenblatt Securities analyst John McPeak raised his price target for Palantir shares from $225 to $260, while maintaining his “buy” rating. He expects the company to beat Wall Street’s forecasts for its third-quarter results and raise its own financial guidance, according to Barron’s. The analyst’s confidence is based on reviews of Palantir’s customer base and Rosenblatt’s own research, according to Investing.com.

According to McPeak, the shift by large companies toward large-scale AI adoption will allow Palantir to significantly expand its customer base and maintain a high level of revenue retention from existing customers. The analyst believes that Palantir’s growth potential far exceeds his revenue forecast for the company in 2027, which stands at $14.6 billion. According to Rosenblatt’s estimates, the potential global market for its products is more than 10 times that amount.

McPick also highlights Palantir’s combination of strong growth and profitability. In the second quarter, the company’s revenue increased by 93% year-over-year, and its gross margin reached 88%. The analyst considers Palantir to be the only provider of off-the-shelf commercial software capable of comprehensively serving this market.

Wall Street is generally bullish on Palantir: 27 of the 38 analysts covering the company recommend buying its stock, according to MarketWatch. Eight recommend holding, and three recommend selling. Wall Street’s average price target is $214.6, which is 9.3% higher than the closing price on October 29.

This article was AI-translated and verified by a human editor