Palantir stock is misunderstood on Wall Street and will rise

In a note on Tuesday, analysts pointed out that a 1980 estimate of cell phone users by 2000 was only 900,000. The actual number of mobile subscriptions that year was over 100 million. Meanwhile, such early predictions failed to see the rise of mobile apps and smart devices.

“We view Palantir’s ( PLTR ) capabilities, technology and path forward in the face of similar fundamental misunderstanding,” wrote BofA analysts led by Mariana Perez Mora. “Upcoming inclusion in the S&P 500 provides a watershed moment for institutional investors to review what they ‘know’ about PLTR.”

BofA reiterated its buy rating on Palantir stock and raised its price target to $50 from $30. The new target represents a 40.5% upside to the stock’s closing price on Friday. And that comes after shares already jumped last week on news that the company would join the S&P 500 later this month and have doubled year to date.

A key misunderstanding on Wall Street is Palantir’s unconventional sales strategy, which has engineers playing a key role. While investors have said the approach limits scalability and profitability, BofA disagrees.

“We believe this method makes PLTR’s solutions significantly more relevant to users and gives PLTR stronger pricing power,” the note said. “Engineers create intimacy with the customer’s mission and help shape the product to add real value.”

Meanwhile, as Palantir gathers more clients from the public and private sectors, BofA sees a huge opportunity for the company to become the common data operational system for the US government and large US enterprises.

Palantir is known for its work in defense and intelligence, but has also expanded into the commercial space.

Celebrating Palantir’s inclusion in the S&P 500, CEO Alex Karp took a victory lap in a video posted Tuesday. It also nodded to Wall Street misconceptions about the company, which developed and delivered products a decade ahead of rivals, enabling entire enterprises to use AI and big language models.

“It’s still radical to the point where people don’t fully understand,” Karp said. “I don’t understand how we could have flipped a switch and gone to GAAP profitability. And we went from what adults, professional managers and some analysts thought was a Frankenstein’s monster led by a freak show leader – me – to a dynamic, clearly profitable company worthy of and admitted to the S&P 500.”

Along the way, Palantir charted its own course, ignoring what conventional wisdom preached, he added, while applauding retail investors who kept their faith in the company.

“Everyone inside the company and around the world should celebrate that the rebels have won,” he said.