06:21 AM EDT, 09/09/2024 (MT Newswires) -- Palantir Technologies' ( PLTR ) addition to Standard & Poor's 500 index, set for later this month, is expected to bolster its profitability profile, with the software maker in a prime position to continue expanding its artificial intelligence pipeline, according to Wedbush Securities.

The company's stock is set to be added to the benchmark measure before the start of trading on Sept. 23, representing another "validation moment" for investors, the brokerage said in a Sunday client note. Palantir's ( PLTR ) shares spiked 7% in Monday's premarket activity.

"Getting added to the S&P 500 Index is an important moment in the Palantir ( PLTR ) story that we believe marks a new era of enterprise growth and profitability over the next few years," Wedbush analysts led by Daniel Ives wrote in the note.

Palantir's ( PLTR ) profitability and cash flow potential has been underestimated, according to Wedbush. The company's artificial intelligence platform, or AIP, and US commercial operations are a "core driver" of its future business model, the firm said. The deployment of Palantir's ( PLTR ) AI capabilities for the US government will allow it to generate momentum within the federal sector as agencies look to integrate AI-driven models to their workflows, Wedbush said.

"We believe this is the start of a multi-year cycle for (Palantir ( PLTR )) to continue generating significant deal flow on the back of AIP as more organizations look to add AI capabilities," Ives said. Wedbush maintained its outperform rating on Palantir's ( PLTR ) stock and reiterated the 12-month price target of $38.

In a separate note, Wedbush said the company is poised to continue expanding its pipeline, provide more use cases to address critical problems across industries and empower data-driven decision making with its portfolio of AI and machine learning solutions. Palantir ( PLTR ) is also seeing "unprecedented" demand for AIP across commercial and government landscapes, according to the brokerage.

Last month, Palantir ( PLTR ) said it is expanding its partnership with technology giant Microsoft (MSFT) to offer various cloud, artificial intelligence and analytics services to the US defense and intelligence communities.

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