Is Palantir a Value Pick or a Falling Knife?

Big data analytics has become an integral part of the modern world with applications in diverse fields ranging from healthcare, education, media, insurance and government organizations. As massive amounts of data get generated every day, its effective management and analysis has become all the more critical to ensure efficient operations across the globe.

According to a report by statista, while amount of data created worldwide in 2021 reached a projected 79 zettabytes, the same is expected to double by 2025. Consequently, to ensure we derive productive insights from this data deluge, big data analytics is also expected to play a major role in coherent data management. To that end, another report by Statisticsreveals that the global big data analytics market is likely to witness a compounded annual growth rate (CAGR) of 30% from roughly $15 billion in 2019 to $68 billion by 2025.

So, how can an investor in the stock market benefit from the same? Which are the companies that appear to be capitalizing on this lucrative market? Many established players like Oracle (ORCL), Microsoft (MSFT) and IBM (IBM) have already started making moves in the space. But today we are focusing on a newly listed company that can make huge strides in the space.

Of course, we are talking about Palantir Technologies Inc. †NYSE: PLTR

Founded almost two decades ago in 2003 by PayPal co-founder Peter Thiel, Nathan Gettings, Joe Lonsdale, Stephen Cohen, and Alex Karp, Palantir is a software company that specializes in big data analytics.

The company has three prominent projects, namely Palantir Foundry, Palantir Gotham and Palantir Apollo. While Gotham and Apollo primarily cater to the US Department of Defense, Palantir Foundry is used by corporate clients. Its clients include Morgan Stanley, Merck and Airbus, among others.

Recent Developments

Palantir has been quite active in bagging deals and securing partnerships with key enterprises across the globe.

Recently, the company announced a partnership with leading automaker and mobility provider, Stellantis NV, who will make use of Palantir’s Foundry system across its brands, business functions and plant locations.

Also, in May, Palantir announced the development of a technology services platform for carbon emissions calculation, reporting and collaboration across commodity supply chains with physical commodity trading company, Trafigura Pte Ltd.

In April, the company bagged a $90 million Blanket Purchase Agreement (BPA) from the Department of Health and Human Services (HHS). This BPA will allow the HHS to make use of the Palantir platform to support their business.

Financial Performance

In its latest results for the first quarter, Palantir reported mixed results with revenues rising, but earnings declining from the previous year.

Revenues for the quarter came in at $446 million which denotes a growth of 30.8% from the previous year. Adjusted earnings per share (EPS), however, witnessed a year-over-year decline of 50% to $0.02.

Future Outlook and Projections

Notably, for the second quarter of 2022, the company’s revenue projections stand at $470 million and an adjusted operating margin of 20%.

Moreover, the company has maintained its adjusted operating margin outlook of 27% for 2022.

Notably, Palantir, as remarked by its CEO Alex Karp, continues to see annual revenue growth of 30% or greater, through 2025.

TipRanks Data

Now let’s take a glance at what TipRanks data is saying about Palantir.

TipRanks’ Stock Investors tool shows that top investors currently have a Very Positive stance on PLTR. Further, 6.3% of the top portfolios tracked by TipRanks, increased their exposure to PLTR stock over the past 30 days.

TipRanks data shows that financial blogger opinions are 76% Bullish on PLTR, compared to the sector average of 65%.

However, The TipRanks’ Hedge Fund Trading Activity tool shows that hedge fund confidence in PLTR is currently Very Negative. The cumulative change in holdings across the 9 hedge funds that were active in the last quarter was a decrease of 32.8 million shares.

Overall, consensus among analysts is a Hold based on three Buys, five Holds and three Sells. The PLTR average price target of $11.45 implies upside potential of 31.5% from current levels. Shares have declined 53% over the past year.

conclusion

Palantir’s financial performance leaves a lot to be desired. However, the company’s ability to bag various business deals and partnerships with large organizations continue to support its revenues. Moreover, its deal wins from major global corporations in a rapidly growing and critical space like big data analytics, gives the company a strong footing, placing it well when compared to its peers.

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