As one of the most exciting IPOs last year, Palantir (NYSE:PLTR) remains a leader in a very exciting industry. PLTR stock benefits from the company having a frontline advantage to impact the way governments operate (as far as the technology is concerned).
This growing influence in the public sphere is reflected in its numbers. PLTR stock is up 260% since going public with signs of more upside ahead.
Although many consider the shares to be overvalued at their current price, the long-term prospects of the company make it a great investment.
Here’s why Palantir is worth betting on this year.
Government Contracts and PLTR Stock
The tech industry’s influence is far and wide but few have the ability to impact agencies in the public domain. This is where Palantir’s key advantage comes into play.
The company creates technology that deals with policing, big data, surveillance and AI. These solutions are made available to government agencies at a more in-depth and higher level.
However, given that this also requires a high level of confidentiality, Palantir’s full capabilities are not made available to the public.
Nevertheless, Palantir’s market reputation and its ability to cater to the needs of the government is a major reason for its success in the public markets.
In the coming years, the company’s technology could be used across various government agencies. This will enable it to have a direct influence on how governments operate. Adding to this, the partnerships with several government agencies also results in massive revenue potential for the company.
In terms of the numbers, Palantir has generated some impressive gains since going public. Management estimates revenue for 2020 will amount to $1.072 billion and its stock is already up 2.5x since its IPO.
At this revenue value, shares are currently trading at approximately 40 times. While this number seems high, it is still on par with industry peers. Datadog (NASDAQ:DDOG) trades at 50 times projected revenue while Snowflake (NYSE:SNOW) has a P/S ratio of 150.
Moreover, Palantir’s biggest customer is the government which could potentially lead to lucrative long-term contracts in the coming years. The company is also planning to scale its businesses in the surveillance and national security sectors which will add to its revenue numbers.
PLTR stock seems a bit pricey right now but investors who are in it for the long-haul will find it a great investment.
Palantir Spikes on Investors’ Optimistic Outlook
Palantir shares have been on a strong run this past month, thanks to increased investor optimism in the stock. On Jan. 28, the company announced its multi-year agreement with Rio Tinto (NYSE:RIO) to license its Foundry platform to the company. According to Rio Tinto the “significant industry partnership” is an important step in the digital transformation of its business.
In more recent news, the sub-Reddit account, r/WallStreetBets, which has proven its ability to influence major price movements in the stock market (see here) often discusses Palantir in its community.
On Monday shares of the company surged 10.2%. This rally is a result of shared optimism on the earning potential of PLTR stock by Redditors on Wall Street Bets. By the end of the day, nearly 180 million shares had traded hands.
Adding to its success, Palantir delivered a successful Demo Day last week. The event shared the highlights and growth outlook of its individual platforms.
Shares of the company spiked by 18% following Demo Day. Investor optimism on Palantir stock continues to remain at an all-time high with this Seeking Alpha writer even giving it a price target of $75 by 2023.
The Bottom Line
After issuing its IPO at $10 last year, shares of Palantir are trending at $35.18 as of this writing. Yes, this is pricey given its revenue levels but it’s also worth looking at from a different lens.
Palantir’s price point is a reflection of investors’ bullish sentiments towards the stock. As a major player in an industry that is known for its long-term contracts, the company has major revenue potential.
For this reason, I am bullish on PLTR stock. This growth stock is worth betting on to gain from its long-term tailwinds.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.