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Barclays analyst Anthony Valentini recently initiated coverage on both Space Exploration Technologies (NASDAQ: SPCX) and Palantir Technologies (NASDAQ: PLTR), starting both stocks with overweight ratings. His $254 price target on SpaceX implies nearly 60% upside, while his $265 target on Palantir offers the potential for a more than 30% gain.
The analyst said: "SpaceX and Palantir have deep competitive moats that enable unparalleled levels of growth and margins."
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Let's take a closer look at these AI stocks to see if now looks like a good time to buy them.
Valentini is a big fan of SpaceX, believing the company's scale and launch capacity give it a big edge. This allows it to put more satellites in space, giving its satellite internet unit, Starlink, a big advantage, while also setting it up to eventually be a leader in orbital data centers.
To reach that level of upside, though, SpaceX needs to show rapid growth and demonstrate that it can deliver on some of its bigger promises. Starlink is clearly a growth area, and its massive satellite network is indeed an advantage. After announcing it was acquiring Grain Management's low-band spectrum, SpaceX appears set to also pursue the large U.S. mobile market by combining satellite and terrestrial spectrum in a single network. This could be a huge opportunity.
In addition to Starlink, Space's growth over the next few years should be led by terrestrial data centers and AI coding, following its acquisition of Cursor. I'd expect leasing out computing capacity to be the company's biggest growth driver, as it's getting great rates, strong payback periods, and is aggressively investing in AI infrastructure in a compute-starved world. Cursor, meanwhile, has a huge opportunity ahead as AI-assisted coding is set to take off.
Continued progress with Starship and being able to reuse both phases of its massive rocket would also be something that could help lift the stock. This would completely flip the economics of space and really position the company well for future ventures like orbital data centers, asteroid mining, and Earth-to-Earth transport.
If SpaceX can come anywhere near Elon Musk's $1 trillion revenue goal in the next several years, the stock should perform very well.
The Barclays analyst is also bullish on Palantir, seeing the AI software-as-a-service (SaaS) company benefiting from two primary trends. The first is the government's shift toward unified data systems, while the second is the increasing use of AI in the commercial space. The U.S. government remains Palantir's largest customer and continues to see robust growth as it works to modernize its systems and embrace AI. Meanwhile, U.S. commercial customers have been Palantir's biggest growth driver.
Valentini pointed to customer-led growth as validation of the value of Palantir's solutions. I think the company's net revenue retention really hammers home this point. It was an outstanding 157% at the end of Q2, which is just an insane number. This essentially means that customers who have been with Palantir for more than a year are spending 57% more than they did a year ago, after any customer churn. If that doesn't show that customers value Palantir's solutions, nothing does.
The combination of the company's Foundry and AI platform (AIP) has effectively become an AI operating system that makes large language models (LLMs) more useful in the real world. By being able to gather data from a wide variety of sources within an organization and linking it to processes and physical objects, Palantir's solution significantly reduces costly AI hallucinations and makes AI more actionable. Its solution can be used across a multitude of industries and organizations, giving it a huge market opportunity and runway for future growth.
While the stock is not cheap, Palantir is showing that it can quickly grow into its multiple (currently a forward price-to-sales ratio of 39 times 2027 analyst estimates), making it an intriguing growth stock to buy even at these levels.
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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool recommends Barclays Plc. The Motley Fool has a disclosure policy.
Wall Street Analyst Predicts 30% Upside for Palantir and 60% for SpaceX. Is It Time to Buy the Stocks? was originally published by The Motley Fool
