Palantir: A Strong Position in the AI Value Chain Warrants Enthusiasm

We have drastically raised our fair value estimate of Palantir stock.

Mark Giarelli 31 January, 2025 | 10:07AM
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Palantir earnings

Key Morningstar Metrics for Palantir Technologies


We are transferring coverage of Palantir Technologies PLTR, maintaining the firm’s narrow moat rating, and roughly quadrupling our fair value estimate from $21 per share to $79. We now view Palantir as fairly valued, despite the premium it trades at relative to other software companies. We believe we are in the early phases of an artificial intelligence revolution in which downstream software companies like Palantir disproportionately stand to benefit.

Our base case assumes Palantir can achieve a growth profile like Salesforce CRM in the 2010s. Salesforce was able to streamline bloated sales teams and drive productivity by creating software that organizes sales data and workflow processes. We believe Palantir will similarly disrupt the current assembly line approach to data analytics, wherein data is gathered, analyzed, presented, and then dropped. Palantir instead creates a read-write loop in which the software learns and improves as data is engaged with, resulting in “What should we do?” solutions that boost productivity and can replace significant chunks of internal information technology efforts.

We have been witnessing an ongoing commodification of large language models in the AI value chain, and we believe economic value is shifting downstream to software companies that can orchestrate smarter LLMs that drive productivity gains. Traditional LLMs are more akin to statistical word generators, but when Palantir orchestrates them with every bit of disparate data available to a customer, they become significantly more useful, thanks to much-needed context about the individual customer and their pain points.

We believe the drivers for this company’s valuation are expectations for the total addressable market that Palantir’s software can address and the firm’s ability to drive penetration of this market. Changes in these expectations can result in significant price volatility, but we believe the company is well-positioned and its best days are ahead of it, justifying its current market valuation.

Palantir Technologies Stock vs. Morningstar Fair Value Estimate

Source: Morningstar Direct. Latest price as of 1:45 PM ET.


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Mark Giarelli  Mark Giarelli is an equity analyst for Morningstar.

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