By Peter Nurse and Yasin Ebrahim
Investing.com -- It’s taken some time in coming but Palantir Technologies Inc (NYSE:PLTR) has finally gone public, providing investors with an excellent opportunity to benefit from growth at a major player in the key area of data analysis.
As American management consultant Geoffrey Moore said, “without big data, you are blind and deaf and in the middle of a freeway.”
Following years of secrecy, given its ties with customers including spy, law enforcement and military agencies, Palantir’s foray into the public market has forced it to pull back the curtain on its operations and revealed fundamentals that have some scratching their hands.
Investing.com's Peter Nurse argues the bull case for the newly minted stock, while Yasin Ebrahim explains why it's a wait-and-see. This is Point/Counterpoint.
The Bull Case
Palantir provides governments and corporations with the tools required to organize and glean insights from mounds of data, helping in areas as varied as detailing the spread of the novel coronavirus to tracking the activities of terrorists.
The U.S. data analytics firm made its debut on New York Stock Exchange debut on Wednesday, after years of speculation, via a direct listing and without the usual razzmatazz surrounding a traditional IPO.
It’s true the stock is trading below its $10 opening price, but this is still well above its reference price of $7.25 and things are likely to look very different when the Street starts its coverage.
The company has yet to make a profit, but surely that won't be long in coming given its losses in the first six months of 2020 totaled $164 million, down from $280 million the same period a year prior.
Palantir anticipates 42% revenue growth in 2020 to about $1.06 billion, according to a filing earlier this week, with gross margins for the first half of this year at an impressive 73%. It also forecasts revenue growth of more than 30% next year.
Palantir was formed in 2003 in the wake of the 9-11 attacks, with its first major backer – the CIA’s venture arm, In-Q-Tel. It was one of the first companies in this space and thus has had a head start in developing the required technology.
While Palantir still analyzes large amounts of data for U.S. government defense and intelligence agencies -- contracts which tend to be frequently rolled over -- the private sector has become increasingly more important.
In fact, Palantir now says that a little more than half of its customers come from the private sector instead of governments. And there will undoubtedly be increasing demand from companies given the massive amounts of data they generate.
"Broadly speaking Covid has been a tailwind for our business," Chief Operating Officer Shyam Sankar said in a recent interview. "We started 83 new engagements with customers in the first three weeks of Covid without getting on a plane."
The coronavirus pandemic has forced companies to revisit how they do business, and the Covid era doesn’t look like ending anytime soon.
The Bear Case