We're Raising Our Palantir Price Target and Revising Another One Lower
We're seeing slower deal-making activity for one, but a nice win and another potential one for the other.
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Ahead of the holiday weekend, we are updating our price targets on two TheStreet Pro Portfolio positions.
This is more of us catching up on things than breaking new ground, but nevertheless, we want to keep our thoughts current. As we move through the coming weeks that will see more companies report and bring data that will allow us to refresh our thoughts about various parts of the economy, we’ll aim to further refine the price targets for the portfolio’s holdings. As we do that, odds are we will also revisit pick-up points and panic points.
Dialing Back Our Target on Morgan Stanley
After trimming our price target for Bank of America BAC, which reflected a pushout in expected IPO activity, members should not be surprised we are dialing back our target on Morgan Stanley MS. During Morgan Stanley's recent earnings call, the management team noted robust M&A pipelines, with activity driven by financial sponsors and mid-size deal growth. While we can surmise that near-term deal activity is stalled given market volatility and uncertainty, the firsm's message was that underlying demand for strategic advice and capital raising remains strong.
However, a strong pipeline doesn’t answer the question of when a pick-up in deal activity will begin. That answer will likely come when market volatility and Trump-related uncertainty begin to subside. The odds of that happening in the near term are low, but we’ll continue to track trade deal progress and other developments.
Like our price target reduction for American Express AXP earlier today, we will comment that while we are reducing our MS target to $125 from $145, we will need to revisit it when deal-making and IPO activity re-accelerate. The portfolio’s position in MS is on the larger side, so should a challenging March quarter earnings season lead MS back to the $100 level that could be a nice place to round out the position.
Raising Our Palantir Target
Even after adding Palantir PLTR to the portfolio, we’ve taken a more conservative stance than some. Still, we continue to see the company benefiting from the combination of AI and productivity-led investment spending.
Over the coming weeks, as companies report, we’ll be focused on comments to that effect for Palantir but also ServiceNow NOW and Elastic ESTC. However, when we see nice program wins like the one Palantir scored with NATO, it’s time to revisit our price target. In doing so, we are lifting it to $105 from $95, but we will also concede that we may need to revise it further in the coming weeks.
Early this week, NATO released a statement that revealed that on March 25, the NATO Communications and Information Agency (NCIA) and Palantir finalized the acquisition of the Palantir Maven Smart System (MSS) for use within NATO's Allied Command Operations. According to the military alliance, this development marked a significant advancement in the modernization of NATO's warfighting capabilities.
In reading through the statement, the following reinforces several messages delivered during Palantir’s recent AIPCon 6 event:
"The MSS NATO capability empowers commanders and warfighters to leverage cutting-edge artificial intelligence (safely and securely in core military operations. By providing a common data-enabled warfighting capability to the Alliance, through a wide range of AI applications - from large language models to generative and machine learning - MSS NATO enhances intelligence fusion and targeting, battlespace awareness and planning, and accelerated decision-making."
And thanks to TheStreet Pro’s Sarge Guilfoyle for catching this next Palantir item: The company is helping the Department of Government Efficiency (DOGE) with a “massive” IRS-related project. Per Wired, DOGE, Palantir, and IRS engineers have been collaborating to build a single API layer above all IRS databases that could touch all IRS data including taxpayer names, addresses, social security numbers, tax returns, and employment data. For now, we’ll want to see if this project moves forward, but if it does it would be another feather in Palantir’s cap and one that further cements its position as a productivity driver.
Reflecting on that, should President Trump’s reshoring efforts bear fruit, it stands to reason that activity will be a positive for Palantir’s commercial business. That's another potential reason why we could have to revisit our PLTR target in the coming months.
PLTR shares remain on our shopping list, but we'll reiterate the comments we made earlier today regarding American Express. With March-quarter earnings heating up next week and the week after, and based on what we saw this morning with UnitedHealth UNH and D.R. Horton DHI, we’ll want to hold near-term to let the market adjust its thinking to more realistic EPS growth prospects for the S&P 500.
At the time of publication, TheStreet Pro Portfolio was long PLTR, MS, AXP, NOW and ESTC.
