Palantir (PLTR.US) GenAI's first-mover advantage supports overvaluation, and Truist is bullish to $223

The Zhitong Finance App learned that although Palantir (PLTR.US)'s valuation is at a high level, Truist Securities still gave it a “buy” rating when it first began research on this analytical and data-driven software company, with a target price of $223.

The Truist analyst team said in an investor report released on Tuesday: “We acknowledge Palantir's significant valuation premium, but we are maintaining its' buy 'rating given its huge opportunities to drive government and enterprise adoption of General Artificial Intelligence (GenAI).”

According to the report, Palantir's development momentum increased significantly due to the release of AIP. Its revenue growth rate increased from 13% in the second quarter of 2023 to 63%, and a larger percentage of growth translated into operating profit margin, reaching more than 50%.

Over the past year, Palantir's share price has risen more than 120%. The company far surpassed most software companies in terms of revenue growth percentages, and there is no sign of slowing down in the short term. In the past two quarters, US government contract revenue increased 50% year over year, while commercial revenue growth accelerated to 73%.

Ramnani stated, “The company reached the 114 rule performance level in the last quarter and is expected to reach the 113 rule in the fourth quarter of 2025. We expect it to be on track to achieve a sustainable 80+ rule performance level, balancing an operating margin of over 50% with continued strong revenue growth.”

He also mentioned, “We compared Palantir to 110 other software companies and found that it is expected to produce the highest 40 Rule performance over the next three years—an unparalleled financial performance in our opinion.”

According to our understanding, the 114 rule refers to the company's revenue growth rate plus operating profit margin. For example, if a company's revenue growth rate is 60% and operating margin is 54%, then its “Rule of 114” is 60% + 54% = 114.

Although most of Palantir's growth has occurred in the US, its potential to secure more commercial and government contracts overseas remains a long-term growth driver.

Ramnani added, “The company provides a leading software platform that integrates large organizations' proprietary data with their operations and security to improve decision-making. This enabled Palantir to seize the opportunity to implement generative artificial intelligence with its AIP, as organizations compete to gain insight and improve efficiency using the technology.”