'We need to smash all forecasts': what analysts are saying ahead of Palantir report

Palantir will have to show not just a good, but an impressive quarterly report to meet the extremely high expectations of investors, Wall Street analysts say. The company has the highest price-to-earnings multiple in the S&P 500 index, but traders are turning a blind eye, betting on Palantir's growth potential thanks to contracts with the Pentagon, expansion of its commercial business and the introduction of AI, writes Bloomberg. The military and civilian AI developer will release its second-quarter report after the close of trading on Aug. 4. Hours before the disclosure, Palantir shares jumped more than 4% and hit an all-time high.

Analysts have long been wary of Palantir's surging stock, notes Bloomberg. Wall Street's most popularrecommendation is to keep previously bought stocks in the portfolio (17 Hold ratings). Another eight analysts recommend Buy (Buy and Overweight), while the remaining four recommend Sell. Wall Street's consensus target price for Palantir securities is $115.5 - 25% below the last closing price.

- Among those who  maintain a neutral rating on Palantir shares is DA Davidson analyst Gil Luria. Palantir has easily exceeded Wall Street's earnings forecasts over the past few quarters and is now showing "more momentum than any other publicly traded software company," but expectations are also "higher than ever," the analyst explained. Palantir's projected organic revenue growth rate is the highest among the more than 100 software companies it tracks, so the risks amid the "off-the-charts valuation" are very high, he pointed out.

On the commercial side, Luria said Palantir will have to build on the success of its AI pilot project and turn new customers into long-term clients. At the same time, the analyst emphasized that Palantir faces growing competition for AI talent in the market.

- "They [Palantir] are now in a position where they have to just 'blow up' the report. They need to literally smash Wall Street's expectations," Robert W. Baird & Co managing director Ted Mortonson agreed with his colleague about Palantir's inflated expectations.

- For its part, Loop Capital last week raised its target price on Palantir shares from $155 to $178 - up 15% from the last close - and maintained a "buy" advisory. The investment firm analyst believes Palantir will again beat revenue and earnings estimates and raise guidance for the current quarter. In his view, even the stock's high valuation is justified: Palantir combines leadership in AI, rare status as a pure-play AI company, and outstanding margins.

- Some analysts are also encouraged by Palantir's deal with the Pentagon, with up to $10 billion in funding, finalized last week. "Palantir remains one of our key technology ideas for investment in 2025, and this deal gives the company the opportunity to make unprecedented progress across its portfolio in both federal and commercial markets," Wedbush analyst Dan Ives said. He expects the company to report strong results related to AI development. Wedbush reiterated a buy recommendation on Palantir's stock (Outperform rating), but his $160 target price is only 4% above the stock's closing price on Aug. 1.

- Investment director at Wealth Consulting Group Jim Worden also thinks Palantir is worth keeping in a portfolio, despite its high price. He says the company may be in its "Apple moment" - like when the first iPhone was released. "Yes, everyone says the stock is overvalued and reflects a perfect scenario," he noted in a Bloomberg statement. - But if Palantir is truly at a growth point where revenue can grow from $1 billion a quarter to $10 billion and on to $20 billion - it has the potential to justify its current valuation."

On average, analysts forecast that the company will report 39% year-over-year revenue growth ($939 million) for the second quarter, free cash flow was about 35% of revenue ($330 million), and operating income was $404 million, Barron's wrote, citing FactSet data.

At the auction on August 4, quotations of the company jumped by 4.3% - up to $160.9. This is the maximum price of securities for all time of circulation on the exchange. Since the beginning of the year, the market value of Palantir has grown by more than 110%. For comparison: the main U.S. stock index S&P 500 added about 6% for the same period. The company's stock trades at a multiple of 81 to expected annual earnings per share - that's 13 times higher than the Nasdaq 100 index, Barron's notes.  

Palantir's main markets are the US and the UK, where revenue grew 38% and 29% respectively in 2024, while the rest of the world grew only 8%, Barron's notes. Revenues from public sector and commercial clients are growing at similar rates, but government contracts still dominate. It is government contracts with could play an important role for Palantir this quarter and through the end of 2025. The company recently crossed two important milestones in its collaboration with the US Army. The first is that Palantir first served as prime contractor on the government's TITAN project, a mobile AI analytics center for the military. Second and more importantly, last week the company awarded a single contract to the Pentagon with a term of up to 10 years and a funding limit of up to $10 billion, cementing its status as a key contractor to the U.S. Department of Defense.

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