Big data company Palantir Technologies (NYSE:PLTR) is slowly but surely moving higher this year. I have always been bullish on PLTR stock. The shares are up 23% over the last month and 167% over the past year.
Many investors who have remained patient with the name have made big gains. If you have missed out on the opportunity to buy PLTR stock, it is not too late to do so yet.
Palantir was trading at $9.20 in October 2020 and went as high as $45 in 2021. It is nowhere close to $45 now, as it closed at $26.78 on Friday. Palantir Technologies is a strong company with high growth potential.
Investing in PLTR stock will generate strong returns in the long-term. With that in mind, let’s take a look at the case for investing in Palantir.
The Government Sector Favors Palantir
Government contracts have remained one of the main sources of revenue for the company. Palantir is trying to increase its commercial revenue, but it continues to remain the top choice for the government, proving its strength and capabilities. The government will not sign contracts with companies that are unreliable or incompetent.
Last week, Palantir Technologies signed a contract with the Federal Aviation Administration to provide tools for using data to determine whether aircraft should be certified. It’s a one-year contract with two option years and is valued at $18.4 million.
Further, the company has formed an alliance with Origin Materials to accelerate the transition of the world to net-zero carbon emissions. Origin Materials is a leader in the carbon-negative material industry, and the alliance between the firms will focus on the decarbonizing of the global supply chain.
Last month, Palantir signed a one-year, $7.4 million contract with the United States Special Operations Command worth $111 million. It also renewed its partnership with the CDC for monitoring diseases and responses to outbreaks.
It also expanded its partnership with the United States Space Force and will provide its software to the force. This deal is worth $32.5 million.
For a long time, Palantir Technologies was heavily dependent on contracts associated with the pandemic. However, that is no longer true. The latest high-profile deals prove that there is strong demand for Palantir’s software even after the pandemic is largely over in the U.S..
Palantir will be boosted by its government contracts in the long-term. However, the company is not solely focused on government contracts; its commercial client base is growing and will certainly increase in the coming years.
It is important for investors to understand that Palantir has existed more than a decade and is not a one-trick pony. It has an impressive business that can continue to generate high revenue in the coming years.
The Bottom Line on PLTR Stock
The demand for data analysis is going to rise in the future, and Palantir will be a leader in this area.
Palantir has strong fundamentals and stable cash flow. In Q1, the company generated free cash flow of $151 million and total revenue of $341 million.
Over the last month, the company has signed government contracts worth a total of $169 million. That proves that Palantir’s software can help companies analyze data. And when a company’s products work well, demand for them naturally grows.
Although most of Palantir’s continues to come from government clients, the company looks well-positioned to obtain significantly more major commercial clients.
Keeping everything in mind, I believe PLTR stock is a great addition to investors’ portfolio, and I think that every pullback of the shares creates good buying opportunities.
The risk/reward ratio of PLTR stock is quite favorable, but investors must be very patient with it.
On the date of publication, Vandita Jadeja 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.