By Senad Karaahmetovic
Shares of Palantir (NYSE:PLTR) are up almost 3% in premarket Thursday trading to continue a healthy run after yesterday’s gains of over 8%.
Today’s rally has been fueled by a Raymond James analyst, who started research coverage on Palantir stock with a Strong Buy rating. His price target of $20 per share reflects an upside potential of almost 100%.
“After falling ~75% from its early 2021 peak, we see the risk/reward as compelling for a software business with a ~30% growth rate, gross margin structure in the 80% range with escalating contribution margins, and a balanced commercial and government customer mix,” the analyst told clients in an initiation note.
At the cure of his positive thesis on Palantir is a TAM of over $120 billion. Palantir is also described as a “cultural unicorn”.
“Our use of the term 'unicorn' is not to be confused with highly valued private companies. In this case, we see Palantir as a cultural unicorn, almost mythical, because we can’t think of many multi-billion dollar tech franchises that reject the Chinese market or rebuff China as a low-cost source of labor/ manufacturing.”
The analyst also sees a “strong financial model” shaped by fast growth, high gross margin, and increasing contribution margins.