Bank of America Is Bullish On Palantir, Raises Price Target to $13

Bank of America came out today issuing a new $13 price target on Palantir. While the price is still substantially lower for Palantir's all time highs, in this market, anything is better than where we currently are.

The reasoning behind this new price increase had to do with demand for data and defense spending. Let's tackle both:

Demand for Data

The demand for data being used in a meaningful way is at an all time high because companies are producing a record amount of data every day within their organizations.

The analysts who spoke about Palantir here described data as the new "bullets." His argument was that if companies have more data, they can shoot more "bullets" across sales, marketing, accounting, operations, supply chains, etc.

The more data they have on all the elements of their business, the more they can meaningfully scale their top line revenue and reduce expenses because they have the business intelligence to understand how to interpret their data.

The analyst further says that Palantir is one of the best companies when it comes to artificial intelligence and machine learning to integrate with data-driven decision making, and since demand is going to continue to grow for data analytics companies, Palantir is a straight forward winner in the space.

Defense Spending

Defense spending was the next reason for the price increase. The analyst argued that the current 850B defense bill passed by congress a few months back is going to heavily benefit software companies that can meaningfully provide software to the USG.

Palantir already got a 53M extension with their Space Systems Command contracting, bringing the total value of it close to 175M over 2 years from 2021-2023.

Bank of America sees that spend increasing to $1T of a defense spending budget by 2026. If that happens, which is likely given how every country is focusing more on defense after the Russian invasion of Ukraine, the question then becomes where that money is going to go.

The likely answer is that it will go to companies that already have a relationship with the USG and have been shown to provide the best software solutions on the market, and since Palantir fits in those two categories, the idea that they can scale their business to benefit from a massive government spend seems to make sense.

Here's my video going deeper on this:

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