By William Gavin
Investors are likely to refocus on potential 'AI winners,' according to UBS analysts
Palantir Technologies' shares have been pressured by valuation concerns and broader market fears of artificial-intelligence-fueled disruption of software companies.
Palantir Technologies' stock has been a fan favorite among retail investors. Now, Wall Street analysts are warming to the software company's story.
UBS analysts led by Karl Keirstead upgraded Palantir's stock (PLTR) to a buy rating, from neutral, on Thursday. The analysts wrote that it's now less of a &#34;struggle&#34; to justify the stock's valuation, as Palantir shares have come down 35% from their recent peak.
Palantir's stock is currently trading at about $135. Keirstead has a $180 price target, implying upside of about 33%.
Palantir's most recent quarter was a record-setting one for the company, bringing both a beat on revenue and earnings expectations. But investors have gotten more nervous about the stock's high valuation and whether artificial intelligence will disrupt software companies.
When UBS began covering Palantir in December 2024, the stock was trading at 124 times estimates for fiscal 2025 free cash flow, Keirstead noted.
Now, as the stock has declined while estimates have still moved higher, Palantir's stock is trading at a comparably easier-to-swallow multiple of 50-times 2027 free-cash-flow estimates.
UBS cast a hypothetical scenario where Palantir can grow at a roughly 50% compound annual rate over the next three years. In that scenario, the 2027 free-cash-flow multiple would be decreased to just one times its projected rate of growth.
&#34;This we believe is finally at a level that many investors can make a strong valuation case for the stock,&#34; Keirstead said in a Thursday note, predicting that that investors will return to &#34;AI winner&#34; stocks like Palantir this year.
He's not the only analyst showing more confidence in Palantir. About 60% of analysts covering the company now rate it at the equivalent of a buy, up from 25% in December, according to FactSet data.
Mizuho's Greg Moskowitz last week upgraded the stock to outperform, from neutral. Like Keirstead, he cited the recent selloff.
&#34;Palantir is in a category of one, delivering total revenue growth, acceleration and margin expansion at scale that is unlike anything else in software,&#34; Moskowitz wrote in a note to investors. &#34;We believe the derating has occurred and that the risk/reward is now attractive.&#34;
Read: Palantir's stock looks less 'frothy' and is now worth buying, this analyst says
Of course, not everyone is bullish on Palantir. Two of the 31 analysts covering the stock have sell ratings, while 10 others have hold ratings, according to FactSet.
Michael Burry - the former hedge-fund manager featured in &#34;The Big Short&#34; for his bets against the housing market in the run-up to the global financial crisis - is shorting the stock. Recently, he highlighted that Palantir's accounts receivable have been growing faster than revenue for nine of the last 12 quarters.
It's &#34;a persistent pattern generally attached to nefarious tricks such as channel stuffing, aggressive revenue recognition or extended payment terms used as sales concessions,&#34; Burry said in a recent Substack post.
See: They bet everything on Palantir and became millionaires. Inside the market's ultimate cult stock.
-William Gavin
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02-27-26 1537ET

Palantir Technologies' stock has received an upgrade from UBS analysts, who now rate it as a buy, citing improved valuation metrics. The stock has dropped 35% from its peak, trading at about $135, with a price target of $180. Analysts predict a potential 50% growth rate over the next three years, making the stock's valuation more appealing. While 60% of analysts now rate it as a buy, concerns remain, including skepticism from some analysts like Michael Burry, who is shorting the stock due to issues with accounts receivable growth.

- UBS analysts upgraded Palantir Technologies' stock from neutral to buy, as valuation concerns ease with a 35% decline from its peak.  
- The stock is currently priced at about $135, with a price target of $180, suggesting a 33% potential upside, amidst a record-setting quarter for revenue and earnings.  
- However, not all analysts are optimistic; some express concerns over growth patterns, including Michael Burry, who warns of potential financial irregularities.

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Palantir's stock nabs another upgrade, with its valuation now less of a 'struggle'