Shares in US data analytics software company Palantir Technologies (PLTR) have soared by around 190 per cent since its initial public offering (IPO) in October 2020. After such strong gains, is Palantir a good stock to buy now, especially after the stock has fallen by 45 per cent from its January high during the stock market selloff in recent days?
This PLTR stock analysis looks at the performance of the stock since the IPO and the outlook from analysts for the share price going forward.
Palantir reports strong 2020 sales growth
The Palantir Technologies share price closed at $9.20 on its first day of trading on October 2, 2020, and peaked at a high of $45 per share in late January, enjoying the growth of 389 per cent. It has since slipped back below $27 per share. Is Palantir a good investment, or was the stock just caught up in the IPO euphoria?
The company reported a 40 per cent increase in fourth-quarter revenue from a year earlier to $322m, and 47 per cent rise in full-year revenue to $1.1bn. It incurred a loss from operations of $156.6m during the fourth quarter, which included $241.8m in stock-based compensation and $18.9m in related employer payroll taxes.
In the fourth quarter, Palantir signed 21 deals worth at least $5m in total contract value, including 12 deals each valued at $10m or more, while the concentration of revenue earned from each customer decreased. New contracts included mining company Rio Tinto (RIO), energy companies PG&E (PCG) and BP (BP), the US Army and Air Force, a three-year $44m expansion with the US Federal Drug Administration (FDA), and a two-year $31m deal with the UK National Health Service (NHS).
In 2020 overall, the number of customers generating more than $1m in revenue annually increased by 32 per cent from 2019. Customers generating more than $5m annually increased by 54 per cent, with customers generating more than $10m annually increased by 50 per cent.
For the full year, government segment revenue rose by 77 per cent from 2019 to $610m, representing around 56 per cent of its total revenue. Full-year commercial segment revenue rose by 22 per cent to $482m, and Palantir reported continued strong momentum in its US commercial business – where revenue grew by 107 per cent – heading into 2021.
The company expects to add a triple-digit headcount to its sales force in 2021, after investments in its sales team in 2020 generated the doubling in revenue. The business predicts first-quarter revenue to rise by 45 per cent year-on-year, with 2021 revenue set to soar by at least 30 per cent.
On February 8, Palantir announced a partnership with US software and services giant IBM (IBM), under which IBM will incorporate a number of modules from Palantir’s Foundry software into its Cloud Pak for Data offering. The Palantir for IBM Cloud Pak for Data package will become available from March 2021, enabling commercial customers to easily build applications with artificial intelligence. The partnership expands Palantir’s distribution capabilities, leveraging IBM sales force and giving its access to a large installed base of customers.
On February 23, Palantir announced it is expanding its relationship with US conglomerate 3M (MMM) in a multi-million dollar deal. As part of its digital transformation, the multinational manufacturer will expand its use of Palantir's Foundry platform to be able to respond quickly to changes throughout its supply chain.
Will the growth in customer deals drive the share price higher? What do PLTR stock predictions from analysts suggest about the direction of the shares in 2021 and beyond?
Palantir stock forecast: analyst outlook is as bullish as ever after earnings
The average 12-month price target from eight analysts that have issued a Palantir Technologies stock prediction is $23.14 per share, with a low of $10 per share and a high of $40 per share, according to MarketBeat. Among those analysts, four have issued sell ratings, two have hold ratings and two have buy ratings.
Some of those ratings were issued before the company reported earnings on February 16. On February 17, Royal Bank of Canada (RY) boosted its price target to $27 per share from $15 per share, raising its rating from ‘Positive’ to ‘Sector Perform’. Morgan Stanley also lifted its price target to $19 per share from $17 previously, while Credit Suisse increased the target to $20 per share from $17 per share.
Goldman Sachs upgraded its Palantir (PLTR) stock price forecast to buy from neutral after the earnings results came in ahead of its estimates, raising its price target to $34 per share from its previous forecast of $13 per share in a note to clients. The analysts explained: “We were encouraged to see a management guide to $4bn of revenue in FY25, implying a 30 per cent five-year [compound annual growth rate] CAGR from FY20. With a growing backlog of $2.8bn in deal value (+31 per cent year on year), we believe there is increasing visibility into the achievability of that long-term target.”
Goldman analysts also added: “Lastly, we have been impressed by the increased efficiency of the model, as the addition of sales reps has actually lowered [customer acquisition costs] CAC by reducing sales cycles through a greater understanding of customer needs.”
On the downside, the analysts noted that Palantir’s customer concentration is high, the data management space is becoming increasingly crowded, and a slowdown in IT spending from government customers – which account for most of its business – could weigh on growth.
In the meantime, analysts at Jefferies Financial Group are also bullish on the stock after earnings, raising their Palantir share price forecast to $40 per share from $30, with an upside scenario price target at $55 per share and a downside target of $20 per share.
They said: “Growth sustainability at significant scale puts PLTR in rarefied air among software companies. Coupled with an aggressive profitability ramp, this is a highly unique story for long-term investors.” The analysts added that in the short term, the stock is set to remain under pressure from the expiry of the lock-up period after the IPO allowing shareholders to sell and profit taking after the recent rally in the share price.
Online stock forecasting service Wallet Investor is very optimistic about the stock’s long-term future. Its Palantir stock forecast 2025 has the company trading at $348.78 per share, up from an average of $78.46 in December 2021.
What is your view – is Palantir stock a buy or sell? You can profit from the stock regardless of the direction of the share price by trading it with contracts for difference (CFDs) at Capital.com. CFDs allow you to try to benefit from any price fluctuation, either up or down, by taking a long or short position, respectively.
Palantir stock forecast for tomorrow, and next weeks
|Date||Price||Min Price||Max Price|
|2021-09-27||$ 27,593||$ 26,814||$ 28,320|
|2021-09-28||$ 27,807||$ 27,065||$ 28,582|
|2021-09-29||$ 27,894||$ 27,160||$ 28,711|
|2021-09-30||$ 28,612||$ 27,807||$ 29,380|
|2021-10-01||$ 28,866||$ 28,116||$ 29,648|
|2021-10-04||$ 28,184||$ 27,401||$ 28,925|
|2021-10-05||$ 28,399||$ 27,668||$ 29,151|
|2021-10-06||$ 28,485||$ 27,682||$ 29,271|
|2021-10-07||$ 29,202||$ 28,398||$ 29,993|
|2021-10-08||$ 29,458||$ 28,711||$ 30,202|
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