Palantir stock is at “more-reasonable levels,” says an analyst.

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Palantir stock is trading sharply higher Wednesday after Piper Sandler analyst Weston Twigg launched coverage of the data-analytics-software company with an Overweight rating, seeing opportunity in the stock after a recent sharp decline. Twigg set a $15 price target, for a potential gain of 36% from Tuesday’s close at $11.04.

Palantir (ticker: PLTR) stock is down about 35% year to date, pressured by a combination of poorly received financial results and the recent selloff in high-growth, high-multiple software shares.

Twigg notes that the slide has brought the stock down to “more-reasonable levels.” He points out that Palantir now trades for 9 to 10 times next-12 months-sales, in line with other fast-growing software stocks, and down from 30 times sales at the stock’s peak. Palantir stock as of yesterday’s close were down 72% from their January 2021 peak at $39.

Twigg likes Palantir’s approach, “combining software, AI, and data into powerful, central IT solutions,” which serve both government and commercial customers. As he notes, Palantir CEO Alex Karp has consistently been forecasting compounded annual growth of 30% or more through 2025. Twigg thinks the company can reach its goal, given strong recent results—Palantir posted 41% top-line growth in 2021—and a “massive and ongoing sales-team expansion.” As Twigg points out, Palantir added150 sales staff last year—up from just 15 or 20 at the start of the year—with a goal of adding 200 more this year. The push seems to be paying off; the company saw 102% growth in U.S. commercial revenue in 2021, with another doubling expected this year.

Twigg adds that the Russian war against Ukraine “could be an accelerator” for the company’s government business both in the U.S. and with international customers.

Earlier this week, Morgan Stanley upgraded Palantir stock to Equal Weight from Underweight, asserting that a potential slowdown in commercial business, and what seemed like unsustainably high operating margins look priced into the stock.

On Wednesday, Palantir stock is up 8.4%, to $11.97.

Write to Eric J. Savitz at eric.savitz@barrons.com

Source: finance.yahoo.com