Palantir (NASDAQ:PLTR) shares are falling another 2% on Wednesday after tumbling 7% during the previous session, as investors continue digesting an earnings report that, while extremely strong on the surface, still failed to satisfy lofty Wall Street expectations.
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The AI data decision-making company delivered 85% revenue growth, raised full-year guidance, and posted another quarter of accelerating demand for its AI offerings. However, investors appeared disappointed by commercial revenue that came in a bit below expectations, while concerns surrounding the company’s premium valuation also continued weighing on sentiment.
So, with PLTR already down over 20% this year, the latest selloff appears connected to growing debate over whether the company can continue expanding rapidly enough to justify the stock’s still-demanding valuation. After all, despite this year’s decline, PLTR shares are still up about 1,700% over the past three years.
D.A. Davidson analyst Gil Luria believes that premium remains warranted, arguing the company is in a “growth league of its own.”
“Palantir reported another outstanding quarter with revenue growth accelerating further due to parabolic US demand for AI solutions,” the analyst said. “Palantir remains well positioned to benefit from helping customers effectively deploy AI through its Ontology.”
Among the many highlights, for Luria, the forward-looking metrics stood out, with NRR (net revenue retention) improving to 150% from 139% previously, and not yet reflecting the meaningful acceleration in growth from new U.S. commercial customers. Key indicators also showed strong momentum, as total remaining deal value reached $10.8 billion, up 98% year-over-year compared to 46% in the same period last year. RPO (remaining performance obligations) also grew strongly, increasing 134% YoY. The company set another quarterly record by closing 206 deals of at least $1 million, up from 180 in the prior quarter and 139 in the same period last year.
Still, the valuation debate refuses to go away, and it is also the main reason Luria remains cautious on the stock despite his bullish view of the business itself.
“We believe Palantir is the best story in all of software. We have raised our estimates and remain positive on the company overall,” he said, before adding, “Palantir scores in the top decile of our coverage on Rule of X. The stock trades at ~50x CY26 revenue, an unprecedented premium to any peer, which is the only reason we maintain our NEUTRAL rating and adjust our price target to $165, from $180, based on ~57x CY26 revenue.”
That $165 target still points to upside of ~24% from current levels. (To watch Luria’s track record, click here)
3 other analysts join Luria on the fence, but with an additional 14 Buys and 2 Sells, the stock claims a Moderate Buy consensus view. The forecast calls for one-year returns of 41%, considering the average price target stands at $187.83. (See PLTR stock forecast)
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.