Mizuho Upgrades Palantir to Neutral Following "Stunning" Revenue Growth

Palantir was upgraded to Neutral from Underperform by Mizuho Securities due to sustained revenue growth, which has exceeded expectations. The analyst notes that the company's recent performance has changed the minds of doubters, citing "material upward revisions."

Palantir Technologies (PLTR) shares closed higher on Wednesday after Gregg Moskowitz, a Mizuho analyst, upgraded the data analytics company from "Underperform" to "Neutral." The analyst issued a constructive note in favor of PLTR, primarily expecting the AI-enabled software firm to beat expectations in its fiscal second quarter. Moskowitz's upgrade comes amidst a sharp uptrend for PLTR stock, which has more than doubled over the past six months.

PLTR is scheduled to report its Q2 financial results on August 4. The consensus is for it to report $0.08 of per-share earnings for its June quarter, up more than 150% versus the same quarter last year. According to Moskowitz, the company's upcoming earnings release could help PLTR sustain its recent gains, adding that it "has a legitimate chance to accelerate revenue growth for a fifth consecutive quarter." The Mizuho analyst raised his rating on PLTR shares this morning primarily because the Denver-headquartered firm is seeing significant strength across both of its business segments: government and commercial.

However, Moskowitz's upgrade does not make him particularly bullish on PLTR stock. He upwardly revised his price target on the AI stock to $135, which suggests over 10% downside from current levels. Mizuho attributed its cautious stance on PLantir shares primarily to valuation concerns, saying, "we were stunned by the multiple that PLTR has attained, which places its valuation dramatically above anything else in software." Palantir Technologies is currently trading at a forward price-earnings (P/E) ratio of more than 400x while Broadcom (AVGO) is going for 50 only at writing.

Palantir's market capitalization of $335 billion is expected to be surpassed by Uber and CoreWeave by late 2028, according to a prediction from The Globe and Mail. Uber, currently worth $201 billion, is expected to increase 69% to $163 per share by late 2028, implying annual returns of roughly 16% over the next three and a half years. CoreWeave, currently worth $63 billion, is expected to increase 440% to $702 per share by late 2028, implying annual returns of roughly 62% over the same period.

Uber and CoreWeave are expected to reach $340 billion by late 2028, surpassing Palantir's current market value. The Motley Fool Stock Advisor team, however, did not include Uber Technologies in their list of top 10 stocks to buy now.

Reference List:
[1] https://finance.yahoo.com/news/ahead-q2-earnings-analyst-betting-204130281.html
[2] https://www.theglobeandmail.com/investing/markets/stocks/PLTR-Q/pressreleases/33364566/prediction-2-ai-stocks-will-be-worth-more-than-palantir-technologies-by-late-2028/