Investing.com -- William Blair upgraded Palantir Technologies (NASDAQ:PLTR) to Market Perform following a 33% selloff from $125 to $84 over the past three weeks, despite concerns over its valuation.
“While valuation is still frothy with potential downside risk of greater than 40% on government contract delays, there have been positive developments,” analysts wrote.
One key factor behind the upgrade is the February 26 DOGE executive order, which William Blair believes “seems earmarked for Palantir.”
The firm explains that the order requires agencies to implement centralized payment tracking systems to assist with cost-cutting initiatives and the Department of Defense’s annual audit, which it has failed seven times.
Analysts expect Palantir’s Foundry/AIP and Databricks-powered Advana to be key platforms for the order’s implementation.
In addition, Palantir’s government pipeline remains strong. “Palantir is pursuing large opportunities such as Army Next-Generation Command and Control, and Army Network Modernization,” analysts noted.
They add that the company’s TITAN contract value may surge in 2026 as it shifts to production.
William Blair also highlighted Palantir’s AI premium, stating that investors “may continue to assign Palantir an ‘AI premium’”, especially given the recent $300 billion-plus valuation of OpenAI.
Further, analysts pointed out that Palantir’s government contracts have proven stickier than expected, despite initial concerns over multisourcing. “While potential for disruption still exists, it seems most likely that Palantir’s revenue remains flat for these programs.”
Lastly, Palantir’s operating leverage remains impressive, with 31% revenue growth guidance for 2025 and 45% operating margin expectations.
Analysts acknowledged that Palantir will likely miss its original 2025 revenue target of $4.5 billion, but called its margin expansion “extraordinary.”
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