Palantir Initiated with Buy at BofA on 'Dominant Position' in AI Software Market

© Reuters

By Sam Boughedda

BofA Securities analyst Mariana Pérez Mora initiated coverage of Palantir Technologies (NYSE:PLTR) with a Buy rating and a $13 price target on Tuesday.

In a note to investors, the analyst said they see Palantir as a beneficiary of rapidly growing demand for AI platforms in both commercial and government end markets.

“Palantir’s dominant position in the AI-powered software market, differentiated end-to-end & highly-secure solutions and first-mover advantages should support more than 30% annual revenue expansion and improving profits in the midterm,” Mora explained.

In addition, Mora said “increased urgency on modernizing military and intelligence capabilities” will provide significant opportunities.

“Our PO is based on a long-term DCF of Base, Bull, and Bear cases for different revenue and cash generation scenarios between now and 2040,” wrote the analyst. “We think PLTR stock has not benefited from the recent defense re-rating despite significant US National Security exposure. While geopolitical tensions pose a risk to worldwide software penetration, they are an opportunity for Palantir’s national security solutions in the US and allied countries, as militaries and intel services will need enhanced data and logistics capabilities as soon as possible.”

BofA expects US and allies' defense budgets to grow with an increased focus on modernization and implementation of new technologies.

“Data is a strategic asset and national security agencies have to make sure they operationalize it securely to better defend from near peer threats like Russia or China.”