Key Points
Analysts may be underestimating Palantir's growth potential.
The company's growth rate could exceed expectations, sending its stock price beyond $300 in a conservative scenario.
Palantir Technologies (NASDAQ: PLTR) has staged a stunning rally recently, with shares of the artificial intelligence (AI) software specialist rising by a stunning 70% since the beginning of August.
This phenomenal jump in Palantir stock has brought its price to just over $200, as of this writing. Investors may now be wondering whether Palantir can sustain its rally and reach the $300 milestone.
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Let's take a closer look at Palantir's prospects in this article and check why it can indeed reach that mark by the end of 2028.
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Investors have finally recognized Palantir's potential
While the AI play has primarily focused on hardware-oriented companies in recent years, software will eventually help users increase productivity and unlock the benefits of this technology. Not surprisingly, AI software spending has been increasing rapidly.
Gartner estimates that AI software spending is poised to jump from $283 billion in 2025 to $452.5 billion this year, a jump of nearly 60%. The trend is poised to continue in 2027, with spending expected to jump to $636 billion. I won't be surprised to see the strong AI software spending environment continuing in 2028, given the technology's productivity gains.
For instance, AI has increased the productivity of software engineers by nearly 33%, as reported by the IT-focused digital publication CIO. This is great news for Palantir. That's because Palantir's Artificial Intelligence Platform (AIP) has been designed to connect generative AI models with an organization's proprietary data, helping them build agents, models, workflows, and other tools so that they can take real-time decisions, reduce redundancy, or increase productivity, among other things.
Moreover, Palantir's AIP has been a massive hit. It has significantly accelerated the company's growth since its launch in April 2023.
Data by YCharts
Given that the AI software market still has significant room for growth, Palantir can sustain its phenomenal growth over the long run, resulting in more stock price upside. In fact, I won't be surprised to see the company breaching the $300 mark by the end of 2028.
Here's the math behind a $300 stock price
Analysts expect Palantir's earnings to jump by 116% in 2026 to $1.62 per share. However, as the chart below indicates, consensus estimates suggest it will take two years for Palantir to double its earnings per share again.
Data by YCharts
However, that's unlikely to be the case given Palantir's huge backlog. The company had total remaining deal value (RDV) worth $13.1 billion at the end of Q2, up by 83% over the year-ago period. This metric indicates the total value of unfulfilled contracts at the end of a quarter, which means that Palantir has a robust revenue pipeline.
Also, the company's margin profile has been improving owing to the increased spending by existing customers. For instance, Palantir secured $3.37 billion in new contracts in Q2, well ahead of its quarterly revenue of $1.93 billion. As the company receives more contracts from both existing and new customers, there is a solid chance that its profit margin will increase.
Data by YCharts
Assuming Palantir doubles its bottom line in 2027 and 2028, its earnings per share could jump to $6.48 in 2028. That could be enough to send Palantir's stock price to $300 in the next two years, even if it trades at just 46 times earnings, a significant discount to its earnings multiple of 163 and a small premium to the tech-laden Nasdaq Composite index's earnings multiple of 43.
However, Palantir could maintain a larger premium if it indeed sustains triple-digit earnings growth, opening the possibility of greater gains.
Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.