Palantir (NYSE:PLTR), which is a major analytics company, came public in late September by using a so-called direct listing. This meant that the company did not raise any money in the offering but instead sold shares directly to the public. The reception was far from smooth as there were various glitches. But despite this, PLTR stock was still able to rise about 30%.
Keep in mind that the company does not need the money. One of the co-founders is Peter Thiel, who is a legend in Silicon Valley. He co-founded PayPal (NASDAQ:PYPL) and also was the first investor in Facebook (NASDAQ:FB). He currently manages a large venture fund.
As for Palantir, the company has raised about $2.6 billion since inception. The latest funding was for $500 million, which came in June. The lead investor was a Japanese insurance company, Sompo Holding.
So now that PLTR stock is trading, what are the prospects? Is there are a bull case to be made? Well, I think there is. But first, let’s get a backgrounder on the company.
Introduction to Palantir
The company got its start back in 2003. And the vision was quite bold. Palantir set out to focus on building sophisticated algorithms and software systems for large projects, mostly for the government.
The timing was propitious since the U.S. wanted to use data analytics to help combat terrorism. But the technology also proved useful in fighting wars, such as in Afghanistan and Iraq.
Because of the secretive nature of these efforts, there are not many details on what Palantir has accomplished. But it does appear that the company did help in finding Osama bin Laden.
Over the years, Palantir has gone on to broaden its business. The company now has a myriad of customers from the private sector that span industries like health care, energy and manufacturing.
Note that Palantir has two main software platforms. One is called Gotham, which is its first system. It was for finding “needles in the haystacks” for military operations like detecting roadside bombs.
Next, there is Foundry. This has leveraged the analytics systems of Gotham for commercial purposes. In fact, it has become quite successful for building AI (Artificial Intelligence) applications.
In a recent story from the Wall Street Journal, Palantir is currently working on a project, called Tiberius, to help manage the rollout of the Covid-19 vaccine, which will certainly be extremely complicated. There will be a need to optimize the supply chain across the U.S. There will have to be ways of estimating the usage rates as well as the populations that have the highest needs for a vaccine. There will also need to be coordination with federal, state and local agencies.
In other words, cutting-edge AI will prove essential for all this. And Palantir has the right mix of experience with massive projects and effectively analyzing huge amounts of data.
For investors in PLTR stock, the Tiberius project could be a major catalyst. There has been much attention paid to Covid-19 plays like with Pfizer (NYSE:PFE), Moderna (NASDAQ:MRNA), Johnson & Johnson (NYSE:JNJ) and Novavax (NASDAQ:NVAX). But there are considerable risks, in terms of whether a vaccine will work.
This is not the situation with PLTR stock, though. The company will benefit regardless of who wins the race for the vaccine. Project Tiberius will also be a showcase of Palantir’s capabilities – and this should help boost business in other areas.
Bottom Line PLTR Stock
PLTR stock has its own risks. AI technology is controversial. As seen with applications like facial recognition, it can be discriminatory and unfair.
Then there is the political uncertainty. If Joe Biden becomes president, might he block a deal with Palantir?
It could happen. Although, this does seem like a stretch. Even though AI has its issues, the technology will likely prove critical for fighting the Covid-19 virus.
The other good news for PLTR stock is that the core business for the company is growing at a rapid clip. In the first half of this year, revenues have spiked by nearly 50% to $481.2 million. Moreover, the market opportunity is an enormous $119 billion.
According to Keith Weiss, an analyst with Morgan Stanley: “Unlocking the value within disparate data sets opens up a large and inflecting market opportunity, while rapid margin improvements highlight the shift towards software platforms and away from consulting engagements, creating an attractive risk/reward at Palantir’s discounted valuation.”
His price target on PLTR stock is $13, which assumes 30% upside from currently levels.
Thus, for those investors looking for a play with Covid-19 and the long-term potential for AI, PLTR does look like a good option right now.
On the date of publication, Tom Taulli did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Tom Taulli (@ttaulli) is an advisor/board member for startups and author of various books and online courses about technology, including Artificial Intelligence Basics, The Robotic Process Automation Handbook and Learn Python Super Fast. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s.