Big-data mining company Palantir Technologies (NYSE:PLTR) has an element of mystery or secrecy surrounding it. Perhaps that’s because Palantir has had clients like the Central Intelligence Agency (CIA) and the Department of Defense. And so, there’s something exciting about owning PLTR stock.
From what we know about Palantir, serving government agencies has been a highly lucrative niche. For instance, Palantir reportedly netted a contract earlier this year to provide software to the Department of Defense. Evidently, that contract was worth as much as $823 million.
On the other hand, value-focused investors might express concerns about PLTR stock. After all, the share price has skyrocketed since the initial public offering (IPO).
In order to justify a high valuation, we would want to see some encouraging fiscal data for Palantir. Perhaps, then, we can pull back the curtain on this mysterious company and uncover some reasons to hold onto PLTR stock.
A Closer Look at PLTR Stock
As InvestorPlace contributor Chris Markoch pointed out, PLTR’s IPO price was a mere $9.50. If you’re planning to wait until PLTR stock reaches $9.50 again, you might never get a chance to buy it.
That’s because, on Nov. 19, the PLTR share price literally doubled since its IPO. In fact, PLTR stock achieved its 52-week high of $19.66 on that day.
The next day, on Nov. 20, PLTR pulled back 4.37% and closed at $18.15. So, as you can see, this stock is a fast mover in both directions. I wouldn’t recommend owning PLTR stock if you’re averse to risk and volatility.
It’s also worth noting that PLTR stock has been quite popular since its debut on the New York Stock Market. Its average daily volume is above 50 million shares, so we should expect PLTR to be a hot item for a while.
Again, PLTR isn’t exactly a value investor’s dream. It’s not trading at a rock-bottom price. If you’re judging PLTR stock by traditional valuation metrics, you might be disappointed.
However, if you’re willing to keep an open mind, you might be encouraged by Palantir’s recent fiscal data. Specifically, the company’s third-quarter results and full-year guidance should change some skeptics’ minds.
As Palantir explained, “The demand for our software has increased steadily over the past year in the face of significant economic and geopolitical uncertainty in the United States and abroad.”
This increase in demand is evidently reflected in Palantir’s third-quarter revenues, which totaled $289.4 million. This represents a whopping 52% increase on a year-over-year basis.
For purposes of comparison, note that during the third quarter of 2019, Palantir “only” generated $190.5 million in revenues, which was already fairly impressive.
It Only Gets Better
Just the aforementioned revenues figure might justify PLTR stock’s high price tag. Yet, there’s even more good news. Apparently, Palantir had not only a great quarter, but a great year overall.
As evidence of this, Palantir raised its revenue guidance for full-year 2020 to a range of $1.070 billion to $1.072 billion. This signifies a 44% improvement on a year-over-year basis.
Can this growth trajectory persist into 2021? If you believe that “significant economic and geopolitical uncertainty in the United States and abroad” will continue, then the answer would be a resounding “yes.”
Morgan Stanley analyst Keith Weiss sees value in Palantir as the company’s platforms address a common problem for government agencies as well as commercial enterprises: “connecting, integrating and organizing data hidden within siloed, disparate legacy systems to make better decisions, drive better outcomes and build better application.”
The Bottom Line
As Weiss’s commentary implies, there will be a need for Palantir’s services in 2021 and beyond.
Consequently, a stake in PLTR stock should continue to provide strong returns, even if you’re buying it at a relatively high post-IPO price.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.