Bank of America makes a big profit on Palantir shares

Palantir (NYSE:PLTR) The stock is about to make a big jump and be included in the S&P 500 Index. As announced last Friday, Palantir will officially begin trading as part of the index on Monday, September 23rd.

For Bank of America's Mariana Perez Mora, a 5-star analyst who ranks in the top 2% of Wall Street equity experts, the moment is one of intense satisfaction. She draws a parallel between the way Palantir is currently viewed and how wrong the forecasters were back in 1980.

That year, AT&T hired a consulting firm to predict the size of the cell phone market by 2000. The company estimated there would be only 900,000 users, vastly underestimating the true number, which by then had already exceeded 100 million cell phone subscriptions. These early projections also did not take into account the rise of apps, streaming and smart devices.

“We believe Palantir's capabilities, its technology and its path forward face a similar fundamental misunderstanding,” said Perez Mora.

The top analyst argues that Palantir's ontology creates a “unique ecosystem” that unlocks the value of data and automation to support decision-making. Perez Mora sees Palantir as a critical enabler for the secure deployment of machine learning, AI and new data science technologies, including upcoming advances in quantum computing.

Now that the company has secured a place in the benchmark index, Perez Mora believes this “turning point” could provide an opportunity for institutional investors to “rethink their 'knowledge' of PLTR.”

Inclusion in the S&P could also significantly reduce the stock's volatility. Inclusion should attract a larger pool of institutional investors, both passive and active, thus giving the stock more stability and liquidity.

Although institutional shareholder ownership in Palantir has increased by 6 percentage points over the past year, it is still well below the average for S&P 500 companies. Moreover, the top five institutional shareholders hold around 20% of total outstanding shares, suggesting there is plenty of room for new institutional investors to “scout” the name.

Now let's get to the heart of the matter: What does this all mean for current investors? Perez Mora rates PLTR shares a Buy and raises her price target from $30 to a Street-high $50, implying the stock will rise 43% in the coming months. (To watch Perez Mora's track record, click here.)

That's a bullish assessment, but others on Wall Street are more cautious about Palantir's prospects; the stock has just a consensus rating of Hold (i.e., neutral), based on a mix of 4 Buy, 5 Hold, and 6 Sell. Meanwhile, the average price target of $27.08 factors in a one-year downside of 22%. (See PLTR Stock Forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important that you conduct your own analysis before investing.