Data mining software company Palantir Technologies (NYSE:PLTR) began trading on the Big Board on September 30 following a direct public offering (DPO). In this direct listing, no new shares of the Palantir share were offered. Instead, existing shareholders were allowed to sell their shares to new investors.
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The New York Stock Exchange initially set a benchmark price of $ 7.25 per share, but on its first day of trading, Palantir stock opened at $ 10 and closed at $ 9.50.
On November 27, Palantir stock hit a record high of $ 33.50 and is now flirting with $ 25.
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Denver-based Palantir was founded in 2003 by a group of executives led by Peter Thiel, founder of Pay Pal (NASDAQ:PYPL). He was also one of the first supports of Facebook (NASDAQ:FB).
Palantir’s early work, notably with government agencies like the Central Intelligence Agency (CIA), have been viewed as controversial and even secretive.
Today’s article examines what investors can expect from the company. Although the PLTR is relatively overvalued, investors with a long time horizon may view any pullback to $ 22.5 or even less as an opportunity to go long PLTR stocks. Here’s why.
Government contracts and Palantir shares
Since 2003, Palantir has expanded its client base to other governments as private companies. For example, in November 2019, the insurer based in Palantir and Japan Sompo (OTCMKTS:SMPNY) have formed a joint venture together. Then in June 2020, they launched the “Real Data Platform for Security, Health and Wellbeing”.
Recent academic research by Roxana Akhmetova from the University of Oxford, complaints the “partnership is problematic” because Thiel is an adviser to Trump.
In September, Palantir was attributed a three-year contract worth $ 44.4 million by the United States Food and Drug Administration (FDA). It will provide data management and analysis services to the FDA’s Center for Drug Evaluation and Research (CDER), which focuses on potential new drugs.
At the beginning of December, Palantir ad cooperation with the Greek government. The country is working to improve its COVID-19 response efforts by incorporating more data and analysis into the decision-making process.
Recently, Palantir has developed a tool for Government of the United States for monitoring the manufacture of coronavirus vaccines as well as their distribution.
The UK’s National Health Service has also worked with Palantir. In summer, CNBC reported, which the UK NHS has given Palantir access to millions of private personal data of UK residents. Palantir recently sign a two-year contract with the NHS. It will now provide the organization with a software platform for processing data.
In fact, a recent press release from the company strong points, Palantir “supports a diverse range of institutions that are responding to the COVID-19 pandemic and adapting to the future.”
How did Palantir’s recent income come about
In mid-November, Palantir released Q3 results. Revenue was $ 289.4 million, up 52% year-on-year. Net loss of $ 853.3 million converted to diluted net loss per share of 94 cents.
As of September 30, the total cash and cash equivalents was $ 1.8 billion. Management raised the revenue forecast for the full year 2020 to a range of $ 1.070 billion to $ 1.072 billion, up 44% year-on-year.
The company highlighted its international expansion in the quarterly release. Co-Founder and CEO Alexander C. Karp said, “Sompo’s work is vital to the well-being and security of Japan, and Kengo Sakurada, Group CEO of the company, has been a vital and trusted partner. as we work with Sompo to expand our reach in Asia. “
The forward P / E, P / S and P / B ratios of the Palantir stock are 208.33, 42.58 and 37.0 respectively.
PLTR stocks are foamy, even for growth stocks capable of securing a significant number of government contracts. Considering the parameters, this is currently one of the more expensive software stocks on the streets.
For example, the P / E and P / B ratios for the ETF SPDR S&P Software & Services (NYSEARCA:XSW) are 30.62 and 6.63.
The bottom line
Palantir is a growth stock and has the potential to create shareholder value for many years to come. However, it is very popular and expensive. Therefore, long-term investors might consider buying the dips, especially if the price drops to $ 22.50.
Are you currently a shareholder? You can think of starting a covered buy position in the PLTR stock. Then you could possibly protect some of your paper profits. For example, an ATM covered call that expires January 15th would decrease portfolio volatility and provide some downside protection.
Investors might also consider an exchange-traded fund (ETF) that also holds Palantir shares in its portfolio. Examples include the Renaissance IPO ETF (NYSEARCA:Initial Public Offering), the First Trust U.S. Equity Opportunities ETF (NYSEARCA:FPX), the Vanguard Mid-Cap ETF (NYSEARCA:VO), the Next Generation Internet ETF ARK (NYSEARCA:ARKW), or the BNY Mellon Core US Small Cap Equity ETF (NYSEARCA:BKSE).
At the date of publication, Tezcan Gecgil did not hold (neither directly nor indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the United States and the United Kingdom. His passion is options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up covered weekly calls to generate income and post content on investment.
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