After hitting an all-time high of $125 per share in mid-February, Palantir Technologies (PLTR) has largely been in decline. PLTR stock fell as low as $66 a share in intraday trading earlier this month but has bounced back since to almost $94 a share.
Much of the concern surrounding Palantir centered around President Trump's tariff plan because it was feared the AI data analytics company could lose business with European governments. Coupled with billion-dollar stock sales by founder Alex Karp and worries that Defense Dept. budget cuts would eat into PLTR's military contract business, and the stock floundered.
Its recent gains, however, came after Trump issued a 90-day pause on his tariffs. That was just followed by the announcement by Palantir of a new deal that should shatter the tariff-trade concerns. With momentum seemingly swinging back in the AI stock's direction, can PLTR stock make up the rest of the lost ground and hit $125 per share again?
Last week NATO finalized its acquisition of Palantir’s Maven Smart System (MSS), an AI platform for battlespace awareness and targeting, that is set to be operational within 30 days. The deal, one of NATO’s fastest procurements, validates Palantir’s global defense relevance, easing fears that Trump’s push for NATO members to boost defense spending could sideline U.S. contractors.
William Blair analyst Louie DiPalma pointed to the deal’s “broader geopolitical significance” that suggests Europe will remain a buyer of U.S. systems as defense budgets rise. The NATO contract, alongside a $100 million U.S. Army deal for Next-Generation Command and Control, projects $3.75 billion in 2025 revenue, up 31% year-over-year, with Palantir having cemented 129 deals worth $1 million in the fourth quarter, which indicates demand for its AI technology is not drying up.
Palantir’s dual revenue streams – government (57% of 2024’s $1.57 billion revenue) and commercial (43% growth in U.S. clients) – positions the company for sustained growth. The U.S. government, its largest customer, increased AI spending by 45% in 2024, with MSS used by all military branches. Commercial expansion, including partnerships with Citigroup (C) for wealth management and Anthropic for FedStart, diversifies its income.
Fourth-quarter earnings beat expectations with $828 million in revenue, up 36% from last year, and earnings of $0.14 per share. The increase in new customers underscores Palantir's ability to scale up..
Despite the NATO tailwind, proposed U.S. defense budget cuts under the Department of Government Efficiency (DOGE) review pose risks, though PLTR is also assisting DOGE to improve the IRS's systems. Still, as noted, fears of spending cuts drove PLTR stock lower, though the NATO deal mitigates some concerns.
Palantir’s valuation, however, remains a hurdle. Trading at 136x forward earnings and 77x sales, far above Nvidia (NVDA) or Microsoft (MSFT), Goldman Sachs analysts have a neutral rating on PLTR stock and an $80 per share price target, citing its “lofty” valuations. Jefferies analysts think PLTR is even more inflated, and have a $60 per share price target because of what they see as aggressive growth assumptions.
Recent partnerships like the one with Everfox for cybersecurity work on classified networks and with AI lab R1 in healthcare, expand Palantir’s reach, but controversies linger.
A Nordic investor, for example, divested his stake in 2024 over human rights concerns tied to Palantir’s work with the Israeli Defense Force, which could be a reputational damage risk to some. Trump’s tariff policies, while not directly impacting software, could raise AI hardware costs, indirectly pressuring clients.
If Palantir sustains 35% annual revenue growth, its price-to-sales ratio could fall to 16 in five years, but current pricing demands flawless execution. It is not easy for companies to maintain such growth rates for extended periods.
Palantir’s path to $125 per share by the end of 2025 is plausible, but challenging. The NATO deal, alongside U.S. contracts and commercial growth, counters budget cut fears and supports a bullish outlook, with analysts like Loop Capital, which has a $125 per share price target, seeing upside.
However, high valuations, geopolitical risks, even concerns over Karp's stock sales, require caution. Palantir is scheduled to report first-quarter earnings on May 5 and if it can deliver on Wall Street's expectations of $864 million in revenue and earnings of $0.13 per share, $125 is achievable.
While I think PLTR will go lower before it regains its lost ground, the AI shop is a quality company and worth buying at the right price.
