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Palantir Technologies: Favorable Growth Potential, Price

I am bullish on Palantir Technologies (NYSE: PLTR) as it has strong growth potential and substantial upside relative to its one-year price target.

Palantir Technologies, a software company, specializes in big data analytics. Headquartered in Denver, Colorado, the company came into existence on May 6, 2003.

As of 2021, the company had a total of 2,733 employees and approximately five offices in different locations in the U.S.. In 2021, the company reported to have about 149 customers, which was an improvement from 125 clients in Q2, 2020.

Palantir Technologies sells several products under its name, including Palantir Apollo, Palantir Foundry, Palantir Gotham, and Palantir Metropolis.

It serves several customer bases, including civil entities, corporate customers, International Atomic Energy Agency, and the U.S. intelligence, military, and police.

Strengths

Palantir Technologies, since its inception, has served over 40 industries, which include a health mix of commercial and government agents. Its customers are spread across the globe, making its global footprint extremely firm and solid.

Additionally, the company’s additional emphasis on research and development has earned it a competitive edge in the market. With the increasing use of AI in several sectors, Palantir Technologies has several external opportunities to grow.

Its new deal with Rio Tinto (NYSE: RIO) will give the company a stronghold in the mining industry, and the existing partnerships, such as that with Amazon (NASDAQ: AMZN), is expected to prove fruitful in the future.

Recent Results

In 2020, Palantir Technologies reported a year-over-year growth in its revenues reaching 47% for the full year, with the total revenue reaching $1.1 billion.

In Q4 alone, the company saw a significant year-over-year increase of 40%, with the total revenue for the quarter extending to $322 million. This increase could be related to its new partnerships with the FDA, U.S. Army, NHS, U.S. Air Force, PG&E, Rio Tinto, and bp.

The average revenue per customer increased by 41% in 2020, taking the total to $7.9 million.

The gross profit for Q4 2020 reached $251,588 and for the entire year, this number was at $740,126. This was a significant improvement from 2019’s results, which came to $153,456 and $500,182, respectively.

However, net loss per share attributable to common stockholders rose from $1.02 in 2019 to $1.19 in 2020 for the entire year.

Valuation Metrics

PLTR stock looks attractively valued at the moment. It currently trades at a 57.9x enterprise value-to-EBITDA ratio, which seems quite high in and of itself, but when taking into account the company’s robust growth potential is actually not too bad.

Analysts expect the company to increase EBITDA from $203.74 million in 2020 to $553.06 million in 2022, reflecting dramatic growth.

Furthermore, net normalized income is expected to increase from $182.54 million in 2020 to $480.21 million in 2022. This massive growth and the bullish long-term outlook for explosive demand growth in the data analytics and artificial intelligence industries are good things for Palantir.

Wall Street’s Take

According to Wall Street analysts, PLTR earns a Moderate Sell analyst consensus based on one Buy rating, three Hold ratings, and four Sell ratings in the past three months. Additionally, the average Palantir price target of $22.14 puts the upside potential at 33.7%.

Summary and Conclusions

Palantir is a leading global data analytics and artificial intelligence company with substantial growth momentum, and a massive long-term growth runway.

After the recent sell-off in the stock price, the valuation multiples look reasonable relative to the long-term growth prospects. The average price target implies that the stock could see substantial upside over the next year.

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