By Kit Norton
Shares of Palantir Technologies rose Thursday following a bullish upgrade as Wall Street believes the stock's valuation hasn't been this attractive in some time.
Palantir stock rose 2.9% to $129.47 in premarket trading, putting it on course to close higher for a fifth straight session. The stock has gained 17% under its four-day winning streak.
DA Davidson analysts Gil Luria and Lucky Schreiner on Thursday upgraded Palantir to Buy from Neutral and raised their price target on the shares to $175 from $165. That new price target represents 39% upside from Wednesday's closing price of $125.73.
Luria wrote that Palantir has "grown into its valuation" and that Alex Karp's company is increasing its advantage over other software names.
"Palantir has several competitive advantages over all other software companies, which is becoming more pronounced in the era of AI. Most recently, the realization by enterprise customers that an orchestration layer is necessary accentuates the need for Palantir," the analysts said.
The basis for this belief is Palantir's Ontology platform, which generally speaking, takes AI models and makes them more secure and precise.
Luria wrote that federal restrictions on AI models show how Palantir's software layer is an integral part of the AI landscape moving forward.
"We believe this development removes the biggest perceived threat to Palantir," Luria added.
The firm also noted that at current trading levels, Palantir's valuation "is the most attractive it has been in awhile."
While Luria believes Palantir stock's valuation is attractive, the stock remains expensive. Its forward price-to-earnings ratio as of Wednesday's closing bell was 71.03 times, compared with the S&P 500's 20.52 times, according to Dow Jones Market Data.
Even before the bullish upgrade, Palantir investors have pushed shares higher since Monday when the company announced it had entered into a new strategic initiative with Nvidia to build custom artificial-intelligence models for the U.S. government.
Under the partnership, Nvidia's AI platform and Palantir's critical infrastructure products will come together to provide U.S. government agencies with a secure "intelligent engine" for training and the deployment of AI models.
"What aligns me with Nvidia, and I think is what the technical customers want, which is control over their compute, their models, their data stack and their alpha," CEO Alex Karp told CNBC's Squawk Box on Wednesday, as way of explanation of the new partnership.
While this isn't the first time Palantir has teamed up with Nvidia, the announcement Monday came at a fortuitous time for Palantir investors.
After three consecutive years of mammoth gains, Palantir stock has fallen 27% in 2026 on broad fears that AI could disrupt software. The pain for Palantir investors ratcheted up in June, with shares sinking 25% on the back of that seven-day losing streak.
During the losing streak, spanning from June 16 to June 25, Palantir broke below multiple key levels of technical support.
But it looks like Palantir stock found its bottom after closing on June 25 at $107.27 and the new Nvidia partnership appears to be the catalyst propelling shares higher.
The upgrade to Buy from DA Davidson is the cherry on top for Palantir investors ahead of the July 4th holiday.
Write to Kit Norton at kit.norton@barrons.com
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