Data mining company Palantir Technologies (NYSE:PLTR) had a difficult month. Palantir shares have lost more than 45% of the value after hitting an all-time high of $45. With the IPO lockup period expiring, several executives sold off shares, bringing the PLTR stock to under $27.
The company reported a strong fourth quarter with operating profit and revenue beating analyst estimates. There was a 40% increase in Q4 revenue and the full-year revenues hit $1 billion. Government revenues increased by 85% and the commercial segment increased by 4%. Palantir expects revenue growth of 30% in 2021.
Not many investors were happy with the results and we saw a dip in the stock. However, this dip is a buying opportunity for those who have been waiting around for a while.
Despite the recent downward trend, there is a lot to look forward to. I am bullish on PLTR stock but for the long term. Invest in the shares only if you have the patience to wait for the company to grow. The shares grew by 47% in 2020 and it has been due to the large government contracts for the Gotham platform.
Let us take a look at the investment case for the stock.
The IBM and Amazon Partnerships
In the fourth quarter, Palantir made strong moves that will have a significant value in terms of revenue and growth. In my previous article, I had mentioned about PLTR being heavily dependent on Covid-19 developments but the company has come around, and how.
Palantir closed 21 deals worth $5 million, including 12 deals worth $10 million. Palantir has the top clients in the government and commercial industry including the U.S. Army, the Food and Drug Administration, 3M (NYSE:MMM), IBM (NYSE:IBM) and now Amazon (NASDAQ:AMZN).
I strongly believe the partnerships with IBM and Amazon will give the much-needed push to revenue and will be a game-changer in the long term. The company is already enjoying strong growth and revenue prospects in the government sector but it is now making the right moves to expand in the commercial sector.
3M and IBM will be using the Foundry platform of the company for digital transformation. Furthermore, the company will offer its Enterprise Resource Planning system to all clients of Amazon Web Services. This partnership with Amazon is the latest in the partnerships the company has forged and it will strengthen its commercial play.
As companies adopt the ERP suite, we will see the results in revenue and growth. With more commercial clients, the revenue will certainly go up.
Wall Street Loves PLTR Stock
ARK Investment Management bought 2.6 million shares of PLTR stock in the dip. The strong future outlook and end of the lockup period is the main reason for the investment. Moreover, this is not the first time that the investment firm has purchased PLTR stock.
Wall Street is also bullish on the stock. In February, Goldman Sachs analyst Christoper Merwin upgraded the stock to buy from neutral with a price target of $34. He cited improved visibility in achieving the long-term target for the upgrade. He further added that the contract with IBM will improve the product market and will help meet the needs of commercial businesses.
Merwin is not alone. Jefferies analyst Brent Thill increased the price target on PLTR stock to $40 and maintained a buy rating. He cited the recent deal announcements for the upgrade.
RBC Capital analyst Alex Zukin also raised the price target to $27.
The Bottom Line
I am bullish on the stock for the strong fundamentals and the client list. The stock may be down for now but the company should not be judged on the present dip. We often see a dip in the stock when the IPO lockup period expires but it is temporary.
Those buying PLTR stock now should remain patient to make profits. Further, the company will hold the first in the series of “double click” demo events on April 14. The event could get the shares moving upwards and will also give a perspective to investors in the future of the company.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article.
