By Mackenzie Tatananni

Palantir Technologies could be a bellwether for artificial-intelligence stocks, a Citi Research analyst said Wednesday as he raised his price target on shares of the software company.

Citi analyst Tyler Radke reiterated a Neutral rating Wednesday as he lifted his price target on Palantir stock. Shares were down 1%, to $102.79, in morning trading after disappointing quarterly results from Advanced Micro Devices and Alphabet's Google triggered a slide in tech stocks.

The decline came after Palantir reported a substantial fourth-quarter earnings and revenue beat on Tuesday, triggering shares to surge 24% and close at a record $103.83.

Radke pointed to Palantir's "impressive all around beat" while noting that other metrics, such as triple-digit growth in U.S. commercial bookings, remain encouraging.

Record customers net adds and improving net revenue retention increasingly validate the "legitimacy" of Palantir's artificial-intelligence platform versus its peers, Radke said.

The company's AI platform, or AIP, has remained a driver of growth. During Tuesday's earnings call, management said Palantir's U.S. commercial business was seeing "unprecedented demand," with AIP driving both new-customer conversions and existing-customer expansions.

Palantir's suite of AI tools has also gained traction at the federal level. Fourth-quarter U.S. government revenue jumped 45% from the prior year, to $343 million, while international government revenue grew 28%, to $112 million.

In a letter to shareholders, Palantir CEO Alex Karp cited "untamed organic growth" as he dubbed the company "a software juggernaut."

Full-year guidance also crushed expectations, Radke said, arguing that forecasted growth of more than 30% and operating margin growth of more than 40% position Palantir "among few with accelerating growth trajectory with scaled profitability."

In spite of his optimism, Radke still has reservations. "While metrics point to inflecting AI growth, we could get more constructive if PLTR showed sustainable levels of upside revisions," he wrote. "There was likely some non-repeatable budget flush in Q4 and now hitting softer Q1 seasonality."

The analyst also noted that the firm's updated regression implies an enterprise value-to-sales multiple of 56 times for 2026. Historically, the return profile for software companies trading at above 50 times forward EV/sales "hasn't been good," Radke said.

Most analysts maintain a neutral stance on shares of Palantir. Of 23 analysts surveyed by FactSet, five rate the stock at Buy or the equivalent, five rate it at Sell, and 13 rate it at Hold.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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February 05, 2025 11:27 ET (16:27 GMT)

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