Palantir shares have struggled this year. D.A. Davidson says buy the dip

D.A. Davidson upgraded Palantir to buy from neutral, lifting its price target to $175 (from $115), implying ~39% upside from Wednesday’s close; the stock rose >3% on the move. The note argues Palantir should benefit as enterprises orchestrate OpenAI/Anthropic-type AI models rather than build directly on them, citing recent U.S. export-control relief for Anthropic’s Claude Fable 5 and Mythos 5. Despite Palantir’s 2026 drawdown of >29%, the analyst highlights improving profitability and a valuation that trades at ~71x forward P/E versus a peak >250 earlier in November.

Analysis

The core signal is not the upgrade itself; it is the market’s willingness to pay for an abstraction layer if model providers remain politically and operationally fragile. That favors PLTR’s positioning as middleware rather than a direct model seller, because the enterprise buyer’s real pain is continuity, governance, and vendor optionality. The second-order winners are systems integrators and defense-adjacent software names that can package multi-model workflows; the losers are point-solution AI startups and any software vendor whose product depends on a single proprietary model stack.

Near term, this is more a sentiment/positioning trade than a clean fundamental re-rating. After a large drawdown, a one-day analyst upgrade can force shorts to cover, but the stock still needs proof that commercial adoption is broadening and that government demand converts into durable backlog, not just rhetoric. If the next 1-2 quarters do not show accelerating revenue efficiency or operating leverage, a ~70x forward multiple can still compress even with healthy growth.

Contrarian risk: the market may be overestimating how much enterprises are willing to pay for orchestration once model prices fall and workflows become native to broader platforms. If customers standardize directly on Microsoft, Salesforce, or service-layer tools, PLTR’s moat narrows to high-compliance niches. The thesis is falsified by any deceleration in bookings/revenue growth or by evidence that customers can swap models without meaningful integration spend; that would turn this from a compounder story into a multiple trap.

Key Decisions for Investors

• Do not chase the gap: buy PLTR only on a 7-10% pullback or after the next earnings print confirms reacceleration in commercial bookings; otherwise keep it on watch.
• Express the view with defined risk: buy a 6-12 month PLTR call spread rather than outright stock if you want upside to the $175 area while limiting damage from multiple compression.
• Relative-value idea: long PLTR / short SNOW over the next 1-3 months if the market rotates toward application-layer AI winners; cover if SNOW shows sharper reacceleration or PLTR guidance softens.
• Monitor for falsifiers: any guidance cut, slower net retention, or weaker federal procurement cadence should invalidate the orchestration thesis and argue for trimming exposure.