Shares of big data specialist Palantir Technologies (NYSE:PLTR) surged on Thursday after reporting blow-out second-quarter earnings results. PLTR stock registered a remarkable 11.5% single-day gain after reporting earnings. The results unambiguously beat analysts’ estimates on revenue and adjusted earnings per share (EPS) by a fair margin. Palantir offers a mix of growth and safety, which is rare for a lot of tech stocks.
PLTR stock has grown modestly since the beginning of the year. Moreover, it trades virtually in line with mean estimates. The bears have talked about its lofty price metrics. For instance, it trades at over 28 times forward sales. Though it may seem that stock has a bloated valuation, when you factor in Palantir’s growth rates, its price metrics are in line with mature tech stocks. The management stated that the company is on track to grow its revenues by at least 30% annually through 2025.
Palantir delivered strong second-quarter growth metrics. Its revenues rose 49% year-over-year to $375.6 million, driven mainly by a 90% increase in U.S. commercial revenue. Moreover, its adjusted earnings of 4 cents per share quadrupled and beat consensus estimates by one cent.
It closed 62 deals of $1 million or more in the quarter and 21 deals worth $10 million or more. The encouraging element in the quarter was the company’s ability to expand its commercial clientele. Critics have panned it for its over-reliance on government contracts. Though the contracts with the U.S. government are dependable, they offer limited growth potential. Hence, it has had to tap into the private sector to expand its total addressable market.
Hence private sector clients are the company’s most promising source of new revenue. Accordingly, Palantir has launched the Foundry for Builders initiative to attract more startups to sign-up to its foundry platform. It’s the company’s biggest push to boost its private sector positioning, and its second-quarter earnings suggest it could work.
Furthermore, cash flows from operations have totaled $23 million, with an adjusted free cash flow of $50 million. Moreover, it has raised its full-year free cash flow outlook to above $300 million. Revenues are likely to come in at $385 million in the third quarter, above the $380.1 million consensus.
Foundry For Builders
Palantir’s breakthrough in its commercial business has been the story of the second quarter. The 90% growth is staggering, considering how the sector had grown by only 19% in the prior quarter. Naturally, it has a lot to do with Palantir’s Foundry For Builders initiative. Foundry offers a comprehensive suite of big data services to its clients include operational decision-making insights, data integration, AI/ML models, and others.
Previously the platform was offered to its public sector clients, but that changed in the first quarter. Initially, it plans to target startups linked with its existing client base and then move on to the mass market with the program. Initial sales from these companies are likely to be low, but there’s plenty of room for growth and expansion. If any of these companies hit the big time and expand to bigger markets, Palantir’s revenues are likely to grow exponentially without any additional marketing spend.
Bottomline On PLTR Stock
Palantir is a high-growth data company that has been killing it with its fundamentals. Its public sector contracts provide a steady and reliable revenue stream, while its private sector ventures promise future growth. With the management bullish on the company’s long-term growth potential, PLTR stock will continue to climb higher.
On the date of publication, Muslim Farooque 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