Software developer and data analytics platform Palantir Technologies (NYSE:PLTR) stock saw a record-high of $45 in late January. However, since then PLTR stock is down 45%, currently at $24.75 as of midday April 14, 2021. Despite the recent decline, since going public on Sept. 30 it is up about 168%. In other words, the proverbial $1,000 invested in the shares at the time would now be worth about $2,680.
Denver-based Palantir Technologies was founded in 2013. Since then it has been developing and selling data analytics software to global governments, U.S. federal agencies, and commercial entities to help them collect and analyze data to make smarter decisions. Among its first clients were the FBI, CIA, and Department of Homeland Security. As a result, there has been some initial controversy and secrecy surrounding its products and services. But investors also realize government contracts typically mean stable, long-term revenue.
Given the recent decline in price, the market wonders whether April could be a good time to buy into the share price. Those investors who believe data management will be even more important in the coming years should consider investing in PLTR stock for the long-term. Here’s why.
The Importance of Big Data Is Ever-Growing
Oracle (NYSE:ORCL) defines big data as, “larger, more complex data sets, especially from new data sources.” 2020 became a year of digital innovations and technologies, leading to more data than ever. Recent metrics highlight that around 90% of data has been created in the past two years.
For governments, organizations, and companies, the issue becomes how to use the collected data to make predictions. Executive decisions in diverse areas, such as artificial intelligence (AI), the Internet of Things (IoT), healthcare, retail, cyber security, government intelligence and more need to be increasingly based on the analysis of this data. Yet, around half the companies that collect do not have a platform to analyze their data.
Palantir is expected to announce first quarter metrics in mid-May. Analysts will be comparing them to those released in February. Q4 revenue was $322 million, which is up 40% year-over-year (YoY). In Q1, management expects growth to accelerate to 45% YoY.
During the pandemic, Palantir has been increasingly offering its services to global public health agencies to track and analyze the spread of the coronavirus. Now, over 50% of revenue comes from government contracts, where Gotham platform support this growth.
Q4 saw numerous new contracts with Rio Tinto (NYSE:RIO), PG&E (NYSE:PCG), the U.S. Army, U.S. Air Force, FDA, and the UK’s National Health Service (NHS). It has recently partnered up with Amazon’s (NASDAQ:AMZN) Web Services. By mid-decade, “almost 50% of all data will be stored in the cloud.” Therefore, this partnership is likely to support PLTR stock in the long-run.
In May, investors will be keen to know if the company has been expanding, especially in regards to its commercial client base. Palantir’s other platform, Foundry, serves companies wishing to analyze data. If management can give shareholders robust client and revenue numbers, PLTR stock could be well rewarded.
The Bottom Line On PLTR Stock
In the past year technology became increasingly integrated into daily life, requiring governments and companies to analyze more data than ever. Big data analytics has significant applications across many industries. We can expect data analysis shares like Palantir to capitalize on this growth.
PLTR stock has been under pressure since the Q4 report. Also, higher bond yields have meant a rotation from growth stocks to value stocks that could potentially do well in inflationary times.
As we start a new earnings season, I would not advocate bottom picking in tech names. In general, prices of such momentum names are highly sensitive to quarterly earnings and revenue performance. On the other hand, I find PLTR stock to be a compelling buy candidate. In two to three years, I’d expect PLTR to surge to $50. Its market capitalization of $45 billion indicates the company could grow a lot more.
Finally, those investors who are not ready to commit full capital into PLTR stock might consider buying an exchange-traded fund (ETF) that also holds Palantir shares. Examples include the ARK Innovation ETF (NYSEARCA:ARKK), the ARK Next Generation Internet ETF (NYSEARCA:ARKW), the First Trust US Equity Opportunities ETF (NYSEARCA:FPX), or the SoFi Social 50 ETF (NYSEARCA:SFYF).
On the date of publication, Tezcan Gecgil is long on 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 three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies.