Software maker Palantir (PLTR) has not been having a great run of things lately. One of its newest moves, however, may be enough to give the company an edge.
The latest move is impressive just for what it does. I’m skeptical that this will be exactly what’s needed to turn things around for Palantir, but it might be the best step it could have made.
I’m just not certain it goes far enough, and thus, I remain bearish. (See Analysts’ Top Stocks on TipRanks)
Looking at Palantir’s stock charts for the year so far shows a company clearly in decline, but fighting the tide. The company hit the high-water mark for the year back in January, when $40 a share looked like a distinct possibility.
One plunge later and the company kicked off February with $30 a share looking like a distinct possibility. The company then recovered to make $40 seem possible once more. After that, a second plunge kicked in. From there, a series of ups and downs, as the company struggled without success to get the share price back up over $30 once more.
There’s no denying, however, that Palantir’s latest move is compelling. Palantir got together with Merck KGaA to produce the Athinia system.
Athinia is described as a “collaborative data analytics platform,” which by itself is eye-catching. The Athinia system will bring together artificial intelligence tools and big data systems to help improve overall quality in its target market.
It will also work to reduce time-to-market figures for the industry. Time-to-market, for those not familiar, is essentially the amount of time it takes for a product to go from initial development stages to being ready for purchase.
The Athinia system is specifically designed for use in the semiconductor industry. That, perhaps more than the AI and big data-packed collaborative data analytics platform, is what makes Athinia especially noteworthy.
Palantir’s previous work in improving connection throughout an organization made it a particularly useful addition to the project, reports noted.
Wall Street’s Take
Turning to Wall Street, Palantir has a Moderate Sell consensus rating. That’s based on one Buy, three Holds, and four Sells assigned in the past three months. The average Palantir price target of $23.14 implies 18% upside potential.
Analyst price targets range from a low of $18 per share to a high of $31 per share.
Too Little, Too Late?
Granted, Palantir made just about the best move it could have made here. A global chip shortage is still hampering a range of industries. Thus, it’s no surprise that someone’s trying to make chip companies perform better.
Offering a tool to improve chipmaker performance should be like offering pick sharpeners in a gold rush. It’s not actually mining gold. Nor is it even really selling supplies. It’s selling supplies to suppliers. Though there’s likely a market, it’s unclear just how much of a market there is.
Worse yet for the Merck-Palantir alliance, there are signs that the chip shortage is starting to abate. While some reports have the chip shortage lasting the entirety of 2022, other reports suggest things should be close to normal by mid-2022.
JPMorgan noted around three weeks ago that “capacity (is) coming online” and from several different directions. Foundry companies are ramping up, but so too are integrated device manufacturers. Also, several new companies are getting in on the high-end computing segment of the market.
That may serve to allow current foundries to work elsewhere. It may be a bitter pill to concede segments of the market to competitors. However, when it allows those foundries to make up their losses elsewhere, it’s likely livable.
Palantir’s idea is a good one, that’s clear. The problem is that it’s coming in on the end of the problem as opposed to the beginning. By the time Palantir can properly ramp up its sales and marketing efforts, most of the chip shortage may be over. Thus, the launch of Athinia may not be the kind of help Palantir likely wanted.
Concluding Views
Palantir has made a huge step here. Offering a means for chipmakers to improve and help pull us out of a global chip shortage faster should go a long way.
However, with the chip shortage possibly approaching its end, the impact of Palantir’s system may be a lot lighter than it hoped for.
The company’s steady decline over the course of 2021 doesn’t exactly help either.
A big win for Palantir might have drummed up more support from the market. Currently, though, this looks like a too-little-too-late scenario to be much of a help.
Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.
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