UBS upgrades Palantir to Buy, saying the stock is "very attractive" after the pullback

Investing.com - UBS upgrades Palantir from Neutral to Buy, believing that recent stock price pullbacks have created an attractive entry point for investors. The stock of this American tech giant is currently down 35% from its peak.

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The analyst team led by Karl Keirstead said, “We recommend investors take advantage of this 35% decline from the peak to buy into the best growth stories in software and companies at the intersection of the two strongest spending trends—artificial intelligence and data.”

“Using a 50x multiple on our forecasted free cash flow in 2027, Palantir’s stock price is very attractive now because we expect 70% revenue growth in 2026 with profit margins around 50%,” they noted.

A key factor supporting UBS’s bullish view is the continued strong demand signals. After surveying partners and clients, analysts said that as companies accelerate AI adoption, Palantir is in a favorable operating environment. One partner candidly described the current situation as: “Demand is very strong.”

The core debate among investors revolves around whether the 50%+ growth can be sustained and whether competition from large cloud service providers, Databricks, or AI model providers will intensify. However, analysts said their latest surveys did not show “any substantial emerging competition.”

The bank currently forecasts a compound annual growth rate (CAGR) of about 54% for revenue over the next three years through 2028 and expects non-GAAP profit margins to remain in the 55%-60% range. It also pointed out that Palantir’s recent growth trajectory has been exceptionally strong, including 70% revenue growth in Q4 2025.

From a valuation perspective, analysts admit that their earlier cautious stance was due to high valuation multiples. Previously, the stock traded at 49 times revenue and 124 times free cash flow based on 2025 estimates.

After the stock price decline and forecast upgrades, valuation multiples have been significantly compressed.

“If we assume Palantir can grow at about 50% CAGR over the next three years, the free cash flow multiple for the next year has now fallen to 1x the expected growth rate,” analysts said. “We believe this finally reaches a level where many investors can build a strong valuation case for the stock.”

UBS maintains a target price of $180. The analysts noted that software companies with accelerating growth tend to perform well over the long term and said Palantir deserves a premium multiple due to its positioning in AI, data platforms, and modern defense technology.

“We believe investors are likely to refocus on ‘AI winners’ like Palantir in 2026,” they wrote.

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