Palantir Technologies (NYSE: PLTR) has seen an incredible debut on Wallstreet. The stock has climbed 164.74% 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 numerous large scale Government and Corporate partnerships. This includes its partnership with tech giant IBM on artificial-intelligence applications and its recent $111 million contract to provide mission command platform for the US Special Operations Command. More recently, the US Army selected Palantir for Intelligence Data Fabric and Analytics Solution.
With such strong revenue catalysts in the pipeline, this article will breakdown everything investors need to know about the Palantir stock forecast.
Table of contents
Jeffries analyst confident in $4 Billion revenue by 2025
Across the board of Wallstreet analysts, Palantir has received a mixed level of Bullish and Bearish valuations. One of the more bullish is Jeffries analyst Brent Thill, who recently raised the firm’s Palantir stock forecast to $30. The analyst noted that Palantir’s Q2 results were “impressive”, highlighting revenue growth of 49% YOY. Thill is confident in the 2025 outlook on Palantir who expect to generate $4 Billion by 2025. The firms valuation represents a 30.4% upside from the current PLTR trading price.
”We believe that PLTR’s commercial initiatives aim to bring its platform to the mass market and that this will take years (not quarters) to execute.”Jefferies analyst Brent Thill in a recent statement
Morgan Stanley cautious on long term growth prospects
Morgan Stanley analyst Keith Weiss has taken a more conservative approach rating questions about Palantir’s growth durability. Weiss currently has a $22 valuation with an Underweight rating. The analyst did highlight an improving commercial business with accelerating revenue growth and 20 new customers.
The concern surrounding Palantir’s division of sales has been ongoing, with investors concerned that the company has heavily relied upon Government contracts as apposed to commercial. Weiss highlighted some important questions surrounding the companies ability to sustain a 30% CAGR with the companies strategic investments heavily driving current growth.
It is clear that analysts such as Morgan Stanley are practising some caution on Palantir’s current valuation despite an improving commercial business.
PLTR financial performance – Palantir Stock Forecast
If we look back at previous historical quarters, Palantir released positive Q3 2020 earnings results which shed light on the companies growing pipeline of Government and Commercial 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 recorded $376 million in quarterly revenue, an improvement of 49% year-on-year. This result brings the half yearly revenue to $717 million. Palantir’s strong Q2 revenue was supported by exponential growth in the companies US commercial revenue segment, which grew by 90% year-over-year. The boost in commercial revenue will give investors some confidence. Why is this?
Over the past 2 quarters, some Bears have cautioned Palantir’s reliance on Government contracts. With improved commercial revenue in Q2, the spread across the companies total revenue can experience some diversification benefits.
Revenue forecasts for Palantir Stock
Looking forward, analysts are forecasting Palantir to generate $1.51 Billion in revenue in 2021. In 2022, the company is forecasted to generate $1.91 Billion in 2022 (average revenue forecast).
Looking long term, the company expects to generate $4 Billion or more by 2025. The strong revenue outlook can be derived from the companies contract revenues alongside further initiatives with Government and Commercial customers. However as discussed by Morgan Stanley analyst Keith Weiss, Palantir will need to deliver on the growth challenges ahead.
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) and US$300 million renewal with their aerospace customer. More recently, the US Army selected Palantir for Intelligence Data Fabric and Analytics Solution contract. Palantir will deploy the Palantir Gotham Platform to support Army Intelligence spanning across multiple security classifications.
Furthermore, COVID-19 has had a positive impact on Palantir’s 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 Palantir’s clients who are looking to simplify the way they operate.
The risks involved for Big Data investors
To begin with, 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.
The Bottom Line – Palantir Stock Forecast
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. In contrast, the risks associated with Palantir, both on an industry level and a corporate level remain high.
Furthermore, 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.
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The information above is presented as factual information and is not financial advice nor does it constitute a recommendation. 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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