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Palantir and Snowflake: Two High-Conviction Growth Stocks Ahead of Market Hesitancy

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  Published in Stocks and Investing on Saturday, December 20th 2025 at 8:01 GMT by Seeking Alpha

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• 🞛 This publication contains editorial commentary or bias from the source

Article Summary – “Two high‑conviction growth stocks I’m bullish on while everyone else hesitates” (Seeking Alpha, id 4854494)

In a recent piece on Seeking Alpha, the author—an equity research analyst with a long‑term focus on technology and data‑driven companies—lays out a clear case for two high‑growth names that are currently out of favor with the broader market. While most investors appear cautious about the valuation and cyclicality of the data‑analytics space, the author argues that both companies possess strong fundamentals, moat‑building strategies, and sizable upside potential that outweigh the prevailing risk‑aversion.

1. The “High‑Conviction” Framework

The article begins by clarifying the author’s “high‑conviction” methodology. The author emphasizes that the selection process revolves around three pillars:

1. Robust Growth Trajectory – Year‑over‑year revenue growth rates of at least 25 % and evidence of a clear, sustainable pipeline.
2. Financial Discipline – Strong gross margins (≥ 80 %) and a recurring revenue mix (≥ 60 %) that reduce the impact of macro‑economic swings.
3. Competitive Moat – Proprietary technology, network effects, or scale that make it difficult for peers to erode market share.

The two names that satisfy all three criteria, according to the author, are Palantir Technologies (PLTR) and Snowflake Inc. (SNOW). While the author admits that the valuation multiples look high in isolation, the expected compound annual growth rates (CAGRs) justify the premium when viewed through the lens of the long‑term equity risk premium.

2. Palantir Technologies (PLTR)

a. Business Snapshot

Palantir is a software company that specializes in data integration, analytics, and operational intelligence. The firm has a heavy focus on large‑government contracts, but it is also expanding into the commercial sector. Key highlights include:

• Revenue Mix: ~ 60 % of revenue is recurring, driven by government and enterprise contracts.
• Gross Margin: Consistently around 90 %, a testament to the low marginal cost of software licensing.
• Cash Flow: The company has moved from net cash burn to operating cash‑flow positive in Q3 2023, aided by higher recurring revenue.

b. Growth Drivers

The author underscores several catalysts that are expected to lift Palantir’s revenue and margin profile:

c. Valuation & Upside

Using a 5‑year DCF model that incorporates an operating margin expansion to 35 % by 2026, the author estimates a fair value of $25.30 per share. At the current price of $18.80, this implies an upside of ≈ 34 % over the next 12–18 months. Even when the author applies a conservative 15 % discount for execution risk, the upside remains in the 20–25 % range.

The author also references Palantir’s Q3 2023 earnings call transcript (link provided) to highlight management’s confidence in a 45 % revenue CAGR for FY 2025. Analyst coverage from Gartner and IDC on the growing demand for “data‑centric AI” reinforces the narrative that Palantir’s moat is deepening.

d. Risks

• Government Dependence: 30 % of revenue is tied to a few large defense contracts, exposing the firm to policy shifts.
• Pricing Pressure: Increased competition from cloud providers could erode margins.
• Execution Risk: Rapid scaling of commercial sales teams might strain operational control.

3. Snowflake Inc. (SNOW)

a. Business Snapshot

Snowflake is a cloud‑based data‑warehouse provider that enables customers to store, process, and analyze data across multiple cloud platforms. The company’s key metrics:

• Recurring Revenue: > 70 % of revenue is subscription‑based.
• Gross Margin: ~ 84 %, driven by high scalability.
• User Growth: 35 % increase in active customers YoY, with a high retention rate (≈ 95 %).

b. Growth Drivers

The author cites a recent IDC report (link provided) that projects global data‑warehouse spending to grow at 12‑15 % CAGR, giving Snowflake a sizable addressable market.

c. Valuation & Upside

Using a 6‑year DCF with an expected operating margin of 28 % by 2027, the fair value estimate is $105 per share. At the market price of $82.50, this corresponds to an upside of ≈ 27 %. Even with a 10 % risk discount, the upside remains in the 20 % territory.

The article references Snowflake’s Q2 2024 earnings release (link provided) which highlighted a 42 % YoY revenue growth and a gross margin expansion to 85 %. Management’s commentary on the “Snowflake Advantage”—the ability to separate compute and storage costs—further underscores the company’s pricing power.

d. Risks

• Intense Competition: AWS Redshift, Microsoft Synapse, and Google BigQuery are all aggressively innovating.
• Churn: Although retention is high, large enterprises occasionally shift to internal data‑lake solutions.
• Capital Allocation: Snowflake’s heavy reinvestment into sales and R&D may dilute shareholder returns if execution falters.

4. Macro & Market Context

The author acknowledges that the macro environment—higher interest rates, persistent inflation, and potential recessionary pressures—has caused the broader market to lean away from growth names. However, they argue that both Palantir and Snowflake operate in “data‑intensive” domains that are less susceptible to cyclical swings. Moreover, the surge in AI adoption, cybersecurity spending, and digital transformation initiatives creates a tailwind that may even accelerate during economic downturns.

The article also references Federal Reserve policy statements (link) to illustrate that while rates might rise, the demand for analytics and data platforms is expected to remain resilient.

5. Investment Thesis & Practical Takeaway

Bottom line: The author recommends adding both PLTR and SNOW to a diversified portfolio with the following guidelines:

• Position Size: 5–10 % of portfolio per stock.
• Entry Point: Buy when the price is at or below the 15‑day moving average to capture a short‑term dip.
• Stop‑Loss: 15–20 % below purchase price to limit downside.
• Target: 20–30 % upside over the next 12–18 months, aligning with the DCF projections.

The author’s conviction is grounded in a confluence of robust growth metrics, moat‑strengthening initiatives, and favorable macro dynamics. By taking a position in these two companies now, investors can position themselves to benefit from the long‑term data‑analytics revolution, even as the market remains hesitant.

6. Key Links for Further Context

These references are woven throughout the article to reinforce the author’s arguments and provide readers with a deeper dive into the supporting data.

In summary, the Seeking Alpha article posits that Palantir Technologies and Snowflake Inc. represent two high‑conviction growth opportunities that are undervalued relative to their expected trajectory. By dissecting revenue composition, margin dynamics, competitive moat, and macro tailwinds, the author builds a compelling case that these names can outperform peers even when the broader market remains risk‑averse. Investors who are comfortable with higher valuation multiples for the promise of sustained, margin‑expanding growth may consider adding these stocks to their long‑term strategy.