Denver-based data-mining-software company Palantir Technologies (NYSE:PLTR) is expected to report Q4 earnings on Feb. 16. Since its market debut on Sept. 30, PLTR stock is up about 240%. Put another way, the proverbial $1,000 invested in the shares at the time, would now be worth about $3,400.
In late January, PLTR stock hit a record high of $45, and it is now hovering around $38. Today’s piece discusses what investors can expect from the company around the release of Q4 metrics, expected Feb. 16.
Palantir shares are likely to be volatile in the short-run. However, buy-and-hold investors could regard any dip below $30 as a potential to invest for the long-term. Let’s see why.
Increasing Government Contracts
Palantir Technologies was founded in 2003 by Peter Thiel along with his colleagues. InvestorPlace.com readers would remember him as the founder of PayPal (NASDAQ:PYPL) and one of the early backers of Facebook (NASDAQ:FB).
Big data contractor PLTR stock went public via a direct public offering (DPO), where no new shares were offered. Instead, existing shareholders sold their Palantir shares to new investors. On Sept. 30, Palantir stock opened at $10.
Many analysts regard some of its work with government agencies such as the Central Intelligence Agency (CIA) as secretive or even controversial. According to the company, though, an important focus has been working with “a diverse range of institutions as they respond to the COVID-19 pandemic and adapt for the future.”
The company was awarded a contract by the U.S. Food and Drug Administration (FDA) to provide data management and analytics services. Palantir has also made available a data tool for the U.S. government for effective manufacturing and distribution of coronavirus vaccines.
Palantir has expanded its work overseas as well. The UK National Health Service has been working with Palantir, which will provide the organization a software platform for data processing.
Recently, Palantir announced a cooperation with the government of Greece, which is working to improve its Covid-19 response work.
Leading mining and metals group Rio Tinto (NYSE:RIO) will now use Palantir’s Foundry Platform to “integrate raw data from a multitude of disparate sources into a representation of critical mining operations.”
Put another way, the data-management tools that Palantir offers are catching the attention of both governments and companies.
What to Expect from PLTR Q4 Earnings
The company’s competitive advantage has so far centered around gathering data from multiple sources onto one platform where users can analyze the data to create intelligence.
When the company reports metrics soon, investors will want to see how revenue has fared. About half of the sales come from the commercial space. The Street would like to see if the ratio has changed and, if yes, what that would mean for future operations.
In Q3 revenue came at $289.4 million, an increase of 52% YoY. Net loss of $853.3 million translated into a 94 cents per share diluted net loss. The company is not expected to be profitable for a few more years.
In the last quarter, the company emphasized its work overseas.
“Sompo’s work is vital to Japan’s welfare and security, and Kengo Sakurada, the company’s group chief executive officer, has been a critical and trusted partner as we work with Sompo to expand our reach in Asia,” Palantir CEO Alexander C. Karp said.
Palantir stock’s forward P/E, P/S, and P/B ratios are 285.71, 58.81, and 51.08 respectively. These metrics show an overstretched valuation, making it one of the most expensive stocks on the Street. For instance, the trailing P/E and P/B ratios for the SPDR S&P Software & Services ETF (NYSEARCA:XSW) are 31.95 and 6.46.
The Bottom Line on Palantir Technologies
Palantir’s market capitalization stands around $55 billion, which means there is still a lot of room for expansion. As a growth stock with strong governmental connections, PLTR stock is likely to create long-term shareholder value. Peter Thiel’s name and experience gives confidence to investors.
Short-term volatility will be part of the growing pains of this well-regarded data analytics company. Its valuations point to a very expensive stock. Thus, buy-and-hold investors might eye $30 or even below as a better entry point.
If you are a shareholder, you might also think of initiating a covered call position in PLTR stock. It would enable you to protect some of your paper profits. For example, an ATM covered call that expires on March 19 would offer some downside protection. You would be able to participate in some of the upside in the shares, too.
Investors could also consider an exchange-traded fund (ETF) that invests in PLTR stock. Examples include the ARK Next Generation Internet ETF (NYSEARCA:ARKW), the First Trust U.S. Equity Opportunities ETF (NYSEARCA:FPX), the Renaissance IPO ETF (NYSEARCA:IPO), or the Vanguard Mid-Cap ETF (NYSEARCA:VO).
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.