After recently reporting blockbuster earnings, it looks like there may finally be some hope for Palantir Technologies (NYSE:PLTR) and PLTR stock.
This stock has been in a funk since it peaked at an all-time high of $45 a share in late January. Since then, the share price of this software company — which specializes in big data analytics — has plummeted 54%. Today, it sits at just over $20.
That sharp move to the downside has led many investors to throwing up their arms in frustration and hitting the sell button. However, it now looks like this selling may have been premature. Palantir recently reported first-quarter earnings that blew away analyst expectations.
PLTR Stock and Strong Q1 Results
For this year’s Q1, Palantir reported 49% revenue growth, easily beating Wall Street analyst estimates. More specifically, revenue for the quarter came in at $341 million versus an expected $332.2 million. Earnings per share (EPS) also came in at 4 cents, which matched analyst forecasts. Additionally, the company raised its guidance for the current second quarter, saying it will bring in $360 million in revenue compared to the $344.3 million that analysts have expected.
These results led to the PLTR stock price jumping by more than 9%, a welcome relief to shareholders who were eager for the shares to find a bottom and rebound. While it’s too early to say if PLTR will retest its 52-week high of $45, at least the first-quarter earnings have the price moving in a positive direction again.
Plus, there’s even reason for more optimism; as the economy recovers and companies and governments renew their spending on data analytics, Palantir stands to gain.
The Government Contracts That Drive PLTR
Palantir’s business is heavily reliant on the lucrative contracts that it has with governments worldwide, such as with the United States. What’s more, Palantir reports that its government business has held up remarkably well despite the pandemic. PLTR said government revenue totaled $208 million in this year’s Q1. Outside of government, Palantir’s commercial business grew in Q1 as well, with revenue reaching $133 million.
Specifically within the United States, Palantir has also said its government revenue gained 83% year-over-year (YOY). Likewise, U.S. commercial revenue rose 72% YOY. Equally impressive, Palantir said that its average revenue per customer grew to $8.1 million in Q1, up from $7.9 million in Q4 2020.
Lastly, the average revenue for Palantir’s top 20 customers was $36.1 million.
Cryptocurrencies and Other Risks
These developments aside, though, there are some negatives for PLTR stock.
Part of the knock on Palantir is that it has been (and likely still is) involved in some
covert government operations related to national security. While PLTR acknowledges some work in this area, it maintains that it is unable to discuss that work publicly. This has led to charges of secrecy and obfuscation by investors, who claim the company is too risky to take a position in. The stock also took a hit last November when Soros Fund Management — which is run by legendary investor George Soros — disclosed that it plans to sell its stake because it “does not approve of Palantir’s business practices.”
On top of this controversy, Palantir is also now accepting Bitcoin (CCC:BTC-USD) as a form of payment. The company has said that it’s even considering adding the crypto to its balance sheet. This move into cryptocurrencies has turned off even more conservative investors, who see it as too big a gamble given the speculative nature of Bitcoin and cryptos.
Buy the Dip in PLTR Stock
All that said, however, Palantir is still a very compelling technology company whose business and earnings are moving in the right direction. With PLTR stock down and its earnings outperforming, it is difficult not to see the company as on sale right now.
Basically, there’s plenty of potential upside in buying PLTR stock at $20 per share. Any lower and the stock would really be a bargain. Earlier this year, as Palantir’s share price was sliding, Goldman Sachs upgraded the stock to a “buy” rating with a price target of $34. That target is 65% higher than the current price.
While some people continue to question Palantir’s business and others scoff at its foray into Bitcoin, the company is performing better-than-expected and its shares are affordable. It is also stable and has a proven track record. So, given the strong fundamentals and upside potential, it wouldn’t be too much of a risk for investors to bet on PLTR stock.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.
