Investors’ affection for technology stocks may be tempered a bit when it comes to Palantir Technologies (NYSE:PLTR), a company that deals with “big data” and government clients. PLTR stock is somewhat new to the market and potential buyers are drawn by its low price.
Reviews from market observers are mixed, though there seems to be more positive than not.
Whether this tech stock is a good choice hinges on those tried-and-true investing fundamentals: diversity of your portfolio and how much risk you are willing to accommodate.
Perhaps some clarity will come after the company releases its earnings report on Nov. 12.
Software and Analytics
Though new to the stock market, Palantir is not a new company. It began in 2003. Founders included Peter Thiel, a co-founder of PayPal (NASDAQ:PYPL). It offers software, data mining and analytics services aimed at interpreting massive amounts of data. Palantir posted revenue of about $739 million in 2019.
When the company started, Thiel said by offering software similar to that used by PayPal to detect fraud, Palantir could help the government combat terrorism without infringing on individual liberties.
Palantir’s customers now include large companies as well as government agencies, including intelligence agencies. The company’s ties to intelligence agencies prompt many to see Palantir with suspicion.
In fact, federal intelligence agencies were Palantir’s original customers. The Central Intelligence Agency was an early investor in the company. Other agencies, including the military and law enforcement, also put the company’s analytical software to work. More recently, the company expanded to serve the private sector, such as financial firms and large companies.
Slightly more than half of the company’s business is with the private sector.
More recently, the company has been involved in operations connected to the novel coronavirus pandemic, including talking with British authorities about testing and tracing activities.
A Look at PLTR Stock
After indicating for several years that the company would remain privately held, Palantir officials quietly took steps earlier this year to take it public. Documents were filed with federal regulators in July. That work culminated on Sept. 30, when a direct public offering was conducted.
The company forecast revenue of $178 million to $180 million during the third quarter ending Sept. 30, which it said would be growth of about 46% year-over-year. However, it also forecast its growth for the year would be about 42%. Non-GAAP operating revenue for the year estimated to be about $121 million.
Palantir has a market capitalization of about $23.2 billion. During its brief existence, a share of PLTR stock has ranged from a high of $15.90 to a low of $8.90. It was launched at $10.
What to Do With PLTR
As I stated earlier, the essential factors when considering whether to invest in PLTR stock is are the diversity of your portfolio and tolerance for risk.
However, when it comes to Palantir Technologies, its very close relationships with intelligence agencies and use of personal data also can influence the investing decision. There are some investors who may not want to embrace PLTR shares for this reason.
That said, over the course of 17 years, the company has filled a growing niche and gained the trust of a range of customers, from secret government agencies to privately owned financial institutions. This roster is expanding to include health agencies coping with the global Covid-19 pandemic. These diverse relationships also indicate that Palantir has several revenue sources and not resting on its laurels.
There is one major negative. The company has not posted a profit, though, it is edging closer to being in the green.
Once Palantir releases its quarterly numbers, we’ll see details about viability.
Bottom line: Palantir is an attractive tech buy – at these prices – for a long-term investor.
On the date of publication, Larry Sullivan did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Larry Sullivan is a veteran journalist in Florida who has covered banking and finance for several years. He is a former investing editor at U.S. News & World Report in Washington D.C.
