By Adam Clark

Palantir Technologies is in a constant tug of war between supporters pointing to the software company's breakneck growth and detractors arguing its valuation is unsustainable. Truist Securities analyst Arvind Ramnani is joining the side of the cheerleaders.

Palantir is hardly a secret artificial-intelligence play, with its shares having gained roughly tenfold over the past two years. But Ramnani sees more gains to come, initiating coverage of the stock with a price target of $223 compared with its closing price of $174.04 on Monday.

"Palantir holds a unique market position in our view, ideally positioned for increased AI adoption by both governments & enterprises," the Truist analyst wrote in a research note released Tuesday. "The company has domain expertise in data integration & security software and is now enabling organizations to deploy GenAI on their data as they race to generate insights and efficiencies."

While attention tends to concentrate on Palantir's defense contracts with the U.S. and other governments -- shares climbed Monday on news of the military action in Venezuela -- the company would prefer investors focus on its commercial revenue. It says there is more scope for growth in that area and contracts are less lumpy.

Truist's Ramnani agrees with that argument. He puts the company's total addressable market at $335 billion for 2025, with $210 billion of that on the commercial side and $125 billion from governments, saying Palantir's current share of that is just 1.3%.

Palantir comes with a hefty valuation -- its forward enterprise value-to-sales ratio sits at more than 70 times -- but that isn't scaring off Ramnani. He noted that it had 63% revenue growth and a 51% adjusted operating margin in its latest quarter. He expects combined revenue growth and operating margin can stay far above the benchmark of 40% or higher for software companies, the so-called Rule of 40.

"While we acknowledge the valuation premium, we believe the company is positioned for significant growth and margin expansion, driving a unique, balanced Rule of 100 + profile," Ramnani wrote.

Ramnani's own valuation of Palantir is based on an enterprise value-to-sales ratio of 65 times his forecast for the company's 2027 business.

Skeptics might scoff at an elevated valuation based on volatile sales forecasts. But with a free cash flow margin of more than 40%, Palantir might also eventually have something for those investors who prize tangible returns alongside share-price appreciation.

"We see potential for Palantir to significantly increase capital returns over the long term, likely through share repurchases, which could offset SBC dilution," wrote Ramnani, referring to stock-based compensation.

Write to Adam Clark at adam.clark@barrons.com

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January 06, 2026 09:33 ET (14:33 GMT)

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