BofA Maintains Palantir’s Buy Rating and $150 PT
BofA Maintains Palantir’s Buy Rating and $150 PT
“Takeaways from BofA Breakthrough Technology Forum: This week we attended BofA’s Breakthrough Technology Forum hosted at the Goodwood Estate in West Sussex, UK.
The unique event brings together industry leaders, top thinkers and investors in Breakthrough Technology. Topics covered this year included defense tech, the future of mobility (electric aviation, EVs, autonomous vehicles), AI, semiconductors, quantum computing, synthetic biology and many other topics.
We had some interesting broad takeaways from the event. The race for the Arctic is heating up: Environmental change is already having a profound impact on global security.
Melting sea ice is intensifying interest in the highly contested “High North” region. The emergence of new potential shipping routes and access to rich deposits of oil, gas and minerals is increasing tension in the region between China, Russia, the US and the Scandinavian nations, perhaps informing the Trump administration’s fascination with annexing Greenland.
Further, this decline in Atlanticism is a fundamental shift, not a fad and will linger for a long time. Doubts linger whether NATO’s Article 5 will really hold in event of a conflict, pointing to increased global insecurity and defense spending. Interplay between AI and regulation: Across the board, the regulatory environment continues to lag behind technology development.
This is certainly the case in Commercial Aerospace (FAA) but it is also the case in healthcare (FDA) and other highly regulated industries.
It was argued that as AI shows the promise to accelerate the development of new technologies by reducing the time to effectively test, certify and run trials, this problem will only get worse.
However, if deployed by regulators, Al may in fact be the solution to the problem by accelerating the time with which regulators can work without compromising safety.
Valuation PLTR: Our PO of $150 is based on a 15x EV/EBITDA on 2035E. We use a longer-term valuation methodology to reflect sustained high-growth and profitability profile of the company.
We think this valuation fairly captures the beneficial position to national security and US government/allies’ digital modernization efforts, a leading role in artificial intelligence (AI)-powered platforms, opportunistic partnerships, strong balance sheet and strong profitability.
Downside risks to our PO are: Lower-than-expected AI-platforms market growth, faster than expected commoditization, higher success from competitors to catch up with technologies, and/or stronger than expected resistance from government customers to use commercial off the shelf solutions.
Upside risks to our PO are: Stronger-than-expected growth of the AI-platforms market, higher-than-expected PLTR penetration, better-than-expected profitability, and/or successful agreements and investments.”
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