Data has quickly become one of the most valuable resources in the world. With corporations willing to invest large amounts of capital to gather insights from every piece of data they can get their hands on, companies that offer big data software and services could be great investments over the long run.
There is a real market need for technology platforms that make the process of collecting, analyzing, and assessing huge amounts of data easier. That’s because the majority of the largest companies and government organizations in the world today are dealing with big data or extremely large data sets that can be analyzed to reveal patterns, trends, and associations.
Palantir Technologies Inc (NYSE:PLTR) is an American software company specializing in big data that could see some upside based on recent analyst upgrades. If you are interested in big data and want to own a unique software company that has a lot of room to grow, this is a stock worth monitoring. Let’s take a closer look at Palantir below and decide whether or not it’s worth adding while it’s trading under $10 a share.
Data Mining Platforms
Palantir was founded by legendary venture capitalist Peter Thiel back in 2003. The company’s goal is to make products for human-driven analysis of real-world data. Palantir operates in two segments, commercial and government, and creates software platforms that help companies with big data analytics. When you are a data analyst, finding a way to summarize large data sets and modeling the data in ways that are easy to interpret is never easy. That’s why Palantir offers such an intriguing platform.
The company’s government platform, Gotham, is primarily meant for data analysts at defense and intelligence agencies. It gathers data from multiple sources, maps it into a meaningful data model, and brings the data to life for human-driven analysis. Foundry is Palantir’s commercial platform that provides companies with a central operating system for an organization’s data. It’s easy to recognize the potential in both of the company’s data mining platforms in an increasingly data-driven world.
Notoriously Secretive Company
What’s interesting about Palantir is that the company is notoriously secretive, which makes sense because some of the company’s clients include the CIA, the NSA, and the Pentagon’s Special Operations command. You might even want to think of Palantir as more of a defense company rather than a tech company.
Palantir’s software can be a very useful tool for the government, as it can aggregate data like fingerprints, bank records, tips from informants, and more to help analysts connect the dots and track criminals. The company is even credited with locating Osama Bin Laden, although Palantir’s CEO Alex Karp has stated “That’s one of those stories we’re not allowed to comment about,”
The very nature of data mining and what Palantir does might be considered controversial to some. The company’s software aggregates tons of personal data that is held by the federal government. This has led to a less-than-pristine public image for Palantir and even generated public backlash thanks to how the company’s software is used by the U.S. Immigration and Customs Enforcement) agency. However, it’s hard to deny the usefulness of data mining software in today’s world. Palantir’s technology is being used by the CDC to provide coronavirus monitoring. The platform uses anonymized data from U.S. hospitals and healthcare agencies such as lab test results, bed capacity, and ventilator supplies to help manage the health crisis. This is just one instance of the good that Palantir’s tech has to offer the world.
Unprofitable but Growing Fast
Palantir is a high-growth company that hasn’t exactly attracted a ton of interest from investors thus far. Although the company has yet to report a profit, it’s worth mentioning that the company saw revenue increase by 49% year-over-year in the first half of 2020. It’s net losses also narrowed year-over-year from $280.5 million to $164.7 million. Palantir anticipates Q3 revenue to be between $278 million to $280 million, which would represent year-over-year growth of 46% to 47%.
This top-line growth is certainly impressive and might be signaling to investors that profitability could be coming sooner rather than later. With that said, there are risks here related to some of Palantir’s commercial clients such as airlines. Commercial businesses make up roughly 53% of the company’s revenue, which means that if a portion of Palantir’s commercial clients is being negatively impacted by the pandemic, they could be forced to cut back on their spending.
The Bottom Line
Palantir stock is undoubtedly a very interesting investment prospect. While the stock’s performance since it began trading publicly has been lukewarm, a break above $10 per share on heavy volume could cause it to rally. If you are a long-term investor, Palantir stock is worth a look here but keep in mind that there are significant risks with investing in companies that have recently gone public.