Shares of Palantir (NYSE:PLTR) stock got a big lift on February 19, 2021. First, the company got upgraded by Goldman Sachs (NYSE:GS) analyst Christopher Merwin. The analyst raised PLTR stock from neutral to buy with an accompanying price target of $34 (previously $13). Bullish investors also cheered the announcement that Cathie Wood, the respected fund manager from Ark Invest added to her firm’s position.
The combination of these outings makes it a near certainty that Palantir stock will move higher when trading begins on February 22. But is this a temporary bump or the beginning of a larger trend. A look at the company’s investor presentation suggests that this big data, growth company has a lot of momentum that should blunt any bearish arguments.
Palantir is a polarizing stock
The bulls and the bears each have their camps and are dug into their positions. Of the eight analysts that currently offer ratings for Palantir, the company has four sell ratings. That’s almost unheard of.
However, there’s a lot to like in the company’s investor presentation that they delivered with their fourth-quarter earnings. And it begins to negate one of the more bearish arguments against PLTR stock.
Palantir has been known to burn cash. And the company’s earnings report still showed the company posting negative earnings per share of 8 cents. This was despite posting a 40% year-over-year increase in quarterly revenue. The $322.1 million reported by Palantir beat estimates by $21 million.
But that’s only part of the revenue story. In 2020 for the full year, the company’s annual revenue growth was 47%. The company reported that revenue from its top 20 customers increased by 34%. At the same time, the percentage of overall revenue from those top 20 customers declined from 67% to 61%.
To do this means that the company is adding customers and increasing the revenue they are generating from their existing customers. Both of these are long-term bullish arguments for Palantir.
Part of the Clean Energy Future
There were two projects in the company’s presentation that caught my eye after the events of this week. First, Palantir has a contract with BP (NYSE:BP) to assist with their Net Zero emissions initiative. Palantir’s Foundry system is helping the company optimize the company’s platform including wind farms, electric charging systems, and solar power generation.
And Palantir has a similar contract with Pacific Gas & Electric (NYSE:PCG) to help optimize its electrical grid. Both of these projects sound exactly like the kind of solution that a state like say, Texas, may be in need of very soon.
In fact, the need to optimize a power grid that includes an “all of the above” portfolio of energy sources may be a catalyst for Palantir.
With Friends Like These
Another reason that Palantir is polarizing is that it does a lot of work with government entities, approximately 56% of its business to be exact. And the value of those contracts can be colored depending on where an investor is on the political spectrum.
Let me give you two examples. The company’s Gotham platform has been given credit for helping the Central Intelligence Agency locate and ultimately kill Osama Bin Laden. Second, it was awarded contracts with local police forces and the U.S. Immigration and Customs Enforcement (ICE).
That leads some Palantir bears to see the company as beholden to a vast right-wing conspiracy. Particularly since one of the founders of Palantir is Peter Thiel who has close ties to Donald Trump.
But that would be an oversimplification of the net cast by Palantir. In fact, the company’s current CEO Alex Karp was a staunch supporter of Hillary Clinton. This is borne out by the fact that although the U.S. government reduced its use of Palantir’s consulting services during the Obama administration, they didn’t abandon it completely.
Palantir Stock is Headed Higher
As I mentioned at the start of this article, Palantir stock is likely to head higher. And it seems to have the attention of the hedge fund community which means it is likely to become a momentum buy.
There are times when you should be skeptical of momentum plays. However, in the case of Palantir, the company looks like it is increasing and diversifying its revenue base. And ultimately any objections about the company’s “penchant for secrecy” should begin to dissolve now that it is a publicly-traded company.
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An insider trade occurs when a corporate executive (such as a CEO, CFO or COO) that has non-public information about a company buys or sells shares of that company's stock. Company insiders are required by law to regularly report their stock purchases and sales to the SEC.
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For example, if Microsoft's CEO, CFO and COO all recently purchased additional shares of Microsoft stock, that would be an indication that there could be unreported news that may positively effect Microsoft's stock price in the near future.
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