Morgan Stanley Assumes Coverage of Palantir at Underweight, $60 Price Target

Morgan Stanley analyst Sanjit Singh assumes coverage on Palantir Technologies Inc.

(NASDAQ: PLTR) with an Underweight rating and a price target of $60.

“The inflection in growth and our positively revised assessment of Palantir’s positioning in the Gen AI cycle is well reflected in shares, which were up +34% in 2024, driven almost entirely by multiple expansion with PLTR’s 56x EV/NTM Sales multiple expanding +292% in 2024.

While acknowledging this positive inflection and looking for ways to get more constructive on shares, the lack visibility of material estimate revisions leaves PLTR trading too far ahead of the company’s intrinsic value to justify a rating upgrade.

In fact, 1) CY25 FCF estimate revisions are up +41% in 2024, but come largely on the back of expense discipline rather than revenue upside, as CY25 revenue estimates are only +10% higher compared to the beginning of the year and with management signaling an investment cycle ahead the outlook for further expansion looks more muted; 2) the Commercial business — where most of the AI narrative is supposed to play out — has contributed less to the CY25 Revenue estimate revisions than the Government business; 3) on a DCF basis, the stock is already pricing ~30% 10-year CAGR and ~41% FCF margins, which would put CY35 FCF at $20.9 billion; 4) Palantir is trading well ahead of High-Growth Software peers at 111x EV/CY26 FCF and 4.5x growth-adjusted (~14% premium) or 41.1x EV/CY26 Sales and 1.7x growth-adjusted (~200% premium); and 5) business momentum now seems to be stabilizing versus inflecting higher with 13 of 23 KPIs down-ticking quarter-over-quarter in Q3, after seeing their best rate-of-change improvements in the quarter prior.”

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