Is Palantir Stock A Buy At $26?
Big data and analytics player Palantirs stock (NYSE: PLTR) rallied by over 6% over the last week (five trading days) compared to the S&P 500 which gained a little over 1% over the same period. Although there hasnt been too much news specific to Palantir stock over the past few days, the broader software space has performed well and investors are also likely continuing to buy into the Palantir stock following its stronger-than-expected Q2 earnings report, published on August 20. So will the rally continue? We think Palantir stock has a little more upside. We value the stock at about $29 per share, or about 35x projected 2021 revenue, a premium of about 10% versus the current market price.
There are a couple of trends driving our valuation. Firstly, Palantirs long-term outlook is strong, with the company forecasting that its annual top-line will grow at 30%-plus levels through 2025. Moreover, the companys commercial business, which had been a mixed performer over the last year, is seeing increasing traction with revenue rising by about 28% year-over-year during Q2, and this traction could hold up, as economies begin to open up following Covid-19 lockdowns with spending by businesses poised to look up. A possibility of an increasing commercial revenue mix is positive for Palantir as the commercial business is much more transparent compared to the government vertical, with valuation multiples for commercial businesses also usually higher than for government contractors. Thirdly, margins are also picking up nicely. Adjusted operating margins rose to about 33% over the first half of 2021 versus about 3% last year, meaning that Palantir could be solidly profitable as revenues continue to scale up. See our analysis Palantir Valuation: Is PLTR Stock Expensive Or Cheap? for more details.
[7/13/2021] Palantirs Commercial Business Is Picking Up. What Does It Mean For The Stock?
Palantir (NYSE:PLTR)published a stronger than expected set of Q2 2021 results as it continued to see robust demand for its software and services. Total revenues rose by about 49% year-over-year to $376 million, while adjusted earnings stood at $0.04 per share, up from $0.01 per share last year. Palantir stock rallied by about 11% in Thursdays trading.
Notably, the companys commercial business, which had been a mixed performer over the last year, saw revenue grow by about 28% year-over-year, as sales to customers in the U.S. soared. This marks an increase from a year-over-year growth rate of about 19% during Q1.Although Palantirs bread-and-butter government revenue actually grew much faster at 66% year-over-year, driven by new deals with the U.S, investors typically pay a lot more attention to the commercial side of Palantirs business. This is because the commercial business is more transparent compared to the government vertical, and valuation multiples for commercial businesses are also usually higher than for government contractors.