Is Palantir Shares Heading to $50 Now That It’s Joining the S&P 500? 1 Wall Street analyst thinks so.

Palantir Technologies (PLTR 0.26%) has taken advantage of the growing utility of artificial intelligence (AI). The company’s AI and data mining solutions have fueled sales growth and growing profits, and Palantir was recently selected to be included in S&P 500sending the stock 15% higher so far this week.

One Wall Street analyst believes this is just a stepping stone to bigger things.

Revision of the thesis

Bank of America analyst Mariana Perez Mora raised her price target on Palantir stock to $50, while maintaining a buy rating on the stock. For those keeping score at home, this represents a potential upside for investors of 45% compared to Monday’s closing price.

The analyst believes there is a “fundamental misunderstanding” about Palantir’s potential. The stock’s inclusion in the benchmark marks a “watershed moment for institutional investors” as they will have to reconsider what they have Think they “know” about Palantir, which could act as a catalyst.

Clearly, the analyst has done his homework. In the second quarter, Palantir’s revenue rose 27% year-over-year to $678 million, resulting in adjusted earnings per share (EPS) that rose 80% to $0.09.

However, the US commercial segment turned heads as revenue rose 55% to $159 million, accounting for 23% of Palantir’s total sales. Perhaps more importantly, the number of customers in the segment increased by 83%, while the value of the remaining transaction increased by 103%.

Management credited strong demand for Palantir’s Artificial Intelligence Platform (AIP), its generative AI solution. The company hosts bootcamps, where customers work with Palantir engineers to develop AIP solutions to real-world problems that have been central to its recent success.

The company expects its growth acceleration to continue as management raised its full-year guidance, its second increase this year. Palantir now expects revenue of $2.75 billion in 2024, up 23%.

Finally, Palantir stock has a forward price-to-earnings-growth (PEG) ratio of 0.33, where any number less than 1 is the standard for an undervalued stock. That’s why Palantir is a clear and undeniable buy.