Palantir Technologies (NYSE: PLTR) has seen an incredible debut on Wallstreet. The stock has climbed 149% since listing, far exceeding analysts expectations. Palantir specialises in big data analytics, in particular within the realm of law enforcement and surveillance. Since listing, Palantir has announced multiple large scale Government and Corporate partnerships. This includes its partnership with tech giant IBM on artificial-intelligence applications. With such strong revenue catalysts in the pipeline, this article will breakdown everything you investors to know about the Palantir stock forecast.
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What are analysts forecasting for Palantir stock over the next year?
After the IPO, coverage on Palantir stock has seen analysts underestimate the companies sharp price growth. The current 12 month price targets from analysts suggest an average target of $23.57 a share. This suggests an upside of 3% from Palantir’s current trading price. Here are the most recent price targets for Palantir stock over the past month:
Royal Bank of Canada 5/13/2021 – analyst Matt Hedberg lowered the 12 month price target from $27 to $20 a share. The price target suggests an upside of 13% from the current trading price.
Jeffries Financial Group 5/13/2021 – analysts lowered the 12 month price target from $40 to $28 a share.
Credit Suisse Group 3/16/2021 – Analyst Yaoxian Chew initiated coverage with a 12-month price target at $20 a share, with an Underperform rating.
Morgan Stanley 2/17/2021– Analysts Keith Weiss boosted the 12-month price target to $19 a share, however downgrading their rating from Equal weight to Underweight. The downgrade had a slight effect on investor sentiment.
The Goldman Sachs Group 2/17/2021 – Analyst Chris Merwin upgraded the 12-month price target from $13 to $34. The analyst also upgraded the rating from a Hold to a Buy. This coverage had a strong impact on bullish investor sentiment.
What this means for Palantir investors?
It is clear that analysts are practising caution on Palantir’s current valuation. However the spread of both bullish and bearish ratings is a product of the company only trading for a short period of time. Furthermore, we are likely to see more coverage from larger institutions throughout this year. However, from the targets we have we can conclude that in recent months analysts have lowered their targets with concerns surrounding Government reliance on revenue.
Palantir Revenue forecasts for 2021
If we look back at previous quarters, Palantir released positive Q3 earnings results, shedding light on its growing pipeline of customers. This was also translated in the Q4 earnings of 2020, with the company posting $422 million in quarterly revenue (40% growth YOY). Looking at the most recent quarter, Palantir generated revenue of $341 million and $151 million in adjusted free cash flow. However, some investors have concerns regarding slower commercial business growth (19% growth YOY) and more reliance on its Government business (83% growth YOY).
Analysts are predicting Palantir to generate $1.47 Billion in revenue in 2021 and $1.91 Billion in 2022 (average revenue forecast). In addition the company expects to generate $4 Billion or more by 2025. The strong growth in revenue is a green light for longer term shareholders.
What is driving the strong revenue outlook for Palantir?
The strong revenue guidance is mainly driven by the impressive growth in deals announced in recent quarters. These contracts include the U.S. Army (Project Vantage $114 million USD), National Institutes of Health (USD $36 million), and USD $300 million renewal with their aerospace customer. Furthermore, COVID has had a positive impact on Palantirs demand from cliental. Businesses have been transforming the way they operate to stay afloat in the dynamic business environment. For example, Enterprise resource planning are one of Palantirs clients who are looking to simplify the way they operate.
The risks involved for Big Data investors
The risk reward factor continues to play a key role in how investors behave in modern day investing. The risks involved with the Big Data industry revolves around the ethical use of Big Data. As noted in our previous article on Palantirs IPO, the misuse of big data can be detrimental for shareholders and the general public. For example, the Cambridge Analytica scandal saw Facebook shares plummet, hence hurting positions of long term shareholders. In addition, the added volume of speculative activity on PLTR stock, we can expect the stock to remain volatile over the next 12-18 month (opinion not advice).
Before I begin, I am obliged to remind our viewers that this article is not financial advice but rather investment commentary from extensive research.
In conclusion, the discussed 12 month analyst forecasts, revenue projections and operational growth holds arguments for the bulls and the bears. However, its worth noting Palantir are on track to reach an operating profit in 2021, as well as turn another 30% YOY gain in fiscal revenue. In contrast, the risks associated with Palantir, both on an industry level and a corporate level remain high. Big Data remains a topic at large and will continue to spur up conversations regarding the misuse of it.
Written by Tyger Fitzpatrick and research completed by Zac Lorschy.
The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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