Data-mining and analytics platform Palantir Technologies (NYSE:PLTR) stock has joined the ranks of momentum shares that receive daytraders’ attention.
Year-to-date, PLTR stock is flat, but it hit a record high of $45 in late January. Now it is flirting with $24. On the other hand, since its market debut on Sept. 30, it is up about 140%. Put another way, the proverbial $1,000 invested in the shares at the time would now be worth about $2,400.
Palantir was founded in 2004 with seed money from the CIA’s In-Q-Tel venture fund. The Denver, Colorado-based group’s work with governments is secretive and, at times, even controversial. For instance, in 2018, it “deployed a predictive policing system in New Orleans that even city council members don’t know about.”
The past year has seen Palantir increasingly offer its services to public health agencies to track and analyze the spread of the coronavirus.
In March 2021, it was reported in the U.K. that the media platform openDemocracy was legally challenging England’s National Health Service (NHS) for the recent contract that was awarded to Palantir.
The shares have been under pressure since Palantir’s Q4 and FY20 earnings report of mid-February. In addition, higher bond yields are sparking a visible rotation from growth stocks to value stocks as well as asset classes that could do well in inflationary times.
Therefore, today’s article discusses what might be next for PLTR stock. If you are a long-term investor, you could consider buying the shares around these levels.
Growing Partnerships and PLTR Stock
Palantir’s quarterly revenue came at $322 million, up 40% year-over-year (YoY). For full-year 2020, revenue was $1.1 billion, an increase of 47% YoY. Over half of the revenue comes from government contracts where Gotham platform fuels the growth.
Its other platform, Foundry, focuses on commercial businesses that want to improve their data management and analytics capabilities.
During Q4, income from operations was $104.1 million. Finally, loss from operations of $156.6 million. Analysts noted that its margins, as well as average revenue per customer, are expanding.
Palantir announced it secured new contracts with Rio Tinto (NYSE:RIO), PG&E (NYSE:PCG), the U.S. Army, U.S. Air Force, FDA, and NHS. Overall, during the quarter, Palantir signed 21 contracts each worth $5 million or more.
So far this year, Palantir and International Business Machines (NYSE:IBM) partnered to offer clients hybrid cloud, data processing, and artificial intelligence (AI), to improve operations and data management. They will target businesses in retail, financial services, manufacturing, healthcare and telecommunications.
In recent weeks, the data-mining group and Amazon (NASDAQ:AMZN) also announced that Palantir was now offering an Enterprise Resource Planning (ERP) system optimized to run on Amazon Web Services (AWS). Put another way, Palantir’s list of impressive clients as well as partnerships is growing steadily.
Management now expects Q1 2021 revenue growth of 45% YoY. That is a respectable metric. However, the company is not yet profitable.
PLTR stock’s forward P/E and P/S ratios are around 172.41 and 21.71, pointing to a rich valuation level. Therefore, the firm gets considerable attention among analysts who debate the share price level. At present, 12-month price targets for the shares range from $15 to $40.
In the days following the earnings release, fund manager Cathie Wood announced she had recently bought PLTR stock in the ARK Innovation ETF (NYSEARCA:ARKK) and the ARK Next Generation Internet ETF (NYSEARCA:ARKW). Her decision once again put the shares of the AI-fueled analytics software in the limelight.
The Bottom Line
The initial investor enthusiasm after Palantir has gone public has leveled off in recent weeks. Meanwhile, the company is accelerating revenue increase by acquiring new clients and forging important partnerships. Its market cap currently stands around $40 billion. Therefore, the company has considerable room for growth.
Depending on your risk/return profile, you might want to buy the dips in PLTR stock with a view to own it for the long haul. In 3-4 years, I expect the shares will be well over $100. It could easily become a core name in a growth portfolio.
On the other hand, trying to time the best entry point into PLTR shares is likely to be rather difficult as it is a momentum stock that gets daytraders’ attention. I would advise retail investors against making such short-term moves. I expect daily volatility to remain high.
Finally, if you are interested in PLTR stock but do not want to commit capital into a single name, you could consider buying an exchange-traded fund (ETF) that holds the company, too.
In addition to ARKK and ARKW, examples would include the Franklin Exponential Data ETF (BATS:XDAT), the iShares Robotics and Artificial Intelligence Multisector ETF (NYSEARCA:IRBO), or the Renaissance IPO ETF (NYSEARCA:IPO).
On the date of publication, Tezcan Gecgil is long PLTR stock.
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.