Palantir Technologies has experienced robust sales growth this year, and that trend is all but guaranteed to continue in 2027. That's just one of many reasons for Wall Street to be bullish on the software company.
Palantir is, however, vulnerable in at least one worrisome way, according to a William Blair analyst.
"The main risk for Palantir is increasing competition from the LLMs," analyst Louie DiPalma said in a research note on Monday.
While Palantir's business growth opportunities with the federal government and elsewhere are substantial, large-language artificial-intelligence models could be an existential threat to the company, in DiPalma's view.
The threat, however, differs from the AI-doomsday scenario for software companies that has loomed over many stocks this year.
DiPalma argued that LLMs are hiring Palantir forward deployed engineers and that this could mean these ex-Palantir employees could build similar apps for the LLMs that they formerly built on Palantir's AI platform -- and offer them for a cheaper price.
"We have not seen this occur, but Palantir has acknowledged that the LLMs are hiring Palantir employees," DiPalma said.
DiPalma has an Outperform rating on Palantir without a price target.
Even with this warning, Wall Street is incredibly optimistic about Palantir's business growth potential, which is underpinned by the U.S. government and commercial businesses delivering strong quarterly results.
The U.S. Marine Corps recently expanded access to Palantir's Maven digital battle-management system across its network. William Blair estimated that Maven is approaching a $1 billion annual recurring revenue run-rate for Palantir.
Rosenblatt analyst John McPeake, meanwhile, was also bullish on Palantir's business prospects. The analyst on Monday raised his Palantir stock price target to $260 from $2250 and maintained a Buy rating ahead of the company's third-quarter earnings due on Nov. 2.
That price target represented 31% upside from the closing price of $198.84 from Monday.
McPeake said that the about 72% revenue growth consensus expectation for the fourth quarter is a bit low and that Palantir's business momentum will continue into 2027.
"Yes the numbers are big, but so is the opportunity," McPeake said in the research note.
Palantir stock fell 0.6% to $197.78 on Tuesday. While shares have only risen about 11% this year as of the closing bell on Monday, the stock has been on a torrid pace since the company's blowout second-quarter earnings on Aug. 3, rising 60% since then.
Barron's made Palantir a stock pick on Oct. 5, and shares have risen 5% between then and the closing bell on Monday.
The stock remains expensive, with a forward price-to-earnings ratio of 90.79 times while the S&P 500 has a forward price-to-earnings ratio of 18.79 times.
Investors will have to weigh whether Palantir's robust sales growth momentum could translate into rapid earnings growth. Because if it does, the expensive stock could get even pricier, unless of course the AI risk comes to fruition.
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