1 unstoppable artificial intelligence (AI) stock to rise 37%, according to two Wall Street analysts

Some of the biggest winners among artificial intelligence (AI) stocks are mega-cap giants such as Microsoft and Nvidia. However, savvy investors know that growth can also be found outside of the Magnificent Seven stocks.

One player emerging as a rising star in AI is the enterprise software developer Palantir Technologies (PLTR 2.02%). Palantir shares are up 136% over the past year.

While an increase of this magnitude might make you think you missed the boat, some Wall Street analysts are calling for even more gains. Dan Ives of Wedbush Securities and Mariana Perez Mora of Bank of America both have a $50 price target on Palantir — implying a 37% upside to current trading levels.

We’ve looked at several factors that could propel Palantir stock to new highs and explored why now could be a profitable opportunity to own the stock.

Don’t cut government business

About half of Palantir’s business comes from public sector deals with the US military and defense agencies of its Western allies. While government contracting can be a reliable source of income, there are some caveats that make it unattractive to some investors. Namely, public sector transactions tend to have erratic sales cycles, which can make revenue and cash flow difficult to forecast.

The growth rate of Palantir’s government operation has slowed over the past few years. The slowdown in Palantir’s government business is more than obvious.

Data Source: Palantir Investor Relations.

However, in the first six months of 2024, Palantir’s government revenue of $706 million represents a 19% year-over-year increase, which I see as the start of a new period of acceleration.

One thing that supports my optimistic outlook is Palantir’s recent partnership with Microsoft. At a high level, the business revolves around Microsoft’s Azure cloud computing infrastructure and Palantir’s artificial intelligence platform (AIP). But more specifically, the relationship involves integrating Azure deployments from US defense and intelligence agencies with Palantir software.

I see this as an important sign of validation from Microsoft and an opportunity for Palantir to reignite growth on the government side of its business.

Image source: Getty Images.

The commercial business is just growing

For years, one of the biggest criticisms of Palantir was that the company relied too much on government business and didn’t have enough of a presence in the private sector. But since launching AIP in April 2023, Palantir has supercharged its commercial clientele.

For the trailing 12-month period ended June 30, Palantir’s total customer count grew 41% year-over-year to 593 customers.

However, during the same period, growth in the commercial sector increased even more dramatically — up 55% year-on-year to 467 customers. Digging even deeper, Palantir has done an incredible job penetrating the private sector especially in the US.

Image Source: Palantir Investor Relations.

Similar to the government segment, I think Palantir’s growth narrative in the private sector is just getting started. Earlier this year, Palantir partnered with the cloud computing and enterprise software giant Oracle.

I believe Palantir will continue to form alliances with the biggest names in the tech world, and I see these relationships as additional sources of lead generation to strengthen the company’s deal flow.

Can Palantir Share Reach $50?

I see several reasons why Palantir stock could rise even higher. In addition to the growth prospects that come with working with big tech, investors should consider how strong Palantir’s overall operation has become.

While revenue is starting to accelerate again, Palantir is consistently generating positive free cash flow and net income on a generally accepted accounting principles (GAAP) basis. The company can use these profits for further investments in research and development (R&D) and new product initiatives.

As long-term investors, it is not too important to focus on a certain share price that a company may reach in a day. Instead, it is more important to look at the big picture and assess the likelihood of stock price appreciation.

For me, the combination of top-line and bottom-line growth offers profitable long-term growth prospects. Moreover, given that Palantir was just selected to be included in the S&P 500I wouldn’t be surprised to see the company land on more radars of big and influential companies.

At the end of the day, I definitely see even better days for Palantir, and I think there’s a lot more upside in the stock — $50 might just be the next stop along the way.