Recent IPO Palantir Technologies (PLTR) has turned higher after the software maker achieved its first profitable quarter.
The Denver-based software provider aims to grow its commercial customer base by expanding into the health care, energy and manufacturing sectors. Government agencies, the chief growth driver, use Palantir software for intelligence gathering, counterterrorism and military purposes.
Read on to find out what the fundamentals and technical analysis say about buying PLTR stock now.
Palantir was founded in the early 2000s by PayPal (PYPL) co-founder Peter Thiel, Nathan Gettings, Joe Lonsdale, Stephen Cohen and Alex Karp. The company name is derived from the palantiri, crystal ball-like “seeing stones” from The Lord of the Rings.
The Denver-based company offers three platforms: Palantir Gotham, used primarily by government agencies; Palantir Metropolis for banks, financial services firms and hedge funds; and Palantir Foundry, used by corporate clients.
To speed up corporate adoption of artificial intelligence software, Palantir and IBM (IBM) announced a global partnership earlier this year. Under the deal, Palantir made its Foundry software available to IBM’s cloud computing customers. The Foundry platform is a centralized data operating system that lets users manage, filter and visualize large data sets.
PLTR Stock Fundamental Analysis
IBD Stock Checkup assigns Palantir a 39 Composite Rating. This proprietary rating gives investors a quick way to gauge a stock’s key growth traits. Palantir’s score puts it in the upper half of the 93-stock enterprise software group, which includes DocuSign (DOCU), Salesforce.com (CRM), Shopify (SHOP) and Zoom Video (ZM).
A 57 Earnings Per Share Rating, part of the overall composite score, also lags. That could improve, however, as Palantir is expected to turn its first annual profit this year.
On May 11, the company notched its first quarterly profit of 4 cents per adjusted share on revenue of $341.2 million. Earnings met, while sales rose 49% year over year and topped views for $332.2 million.
Palantir’s software is used by government agencies in a wide range of applications — and the company sees plenty of room to expand further into the commercial sector.
“Where the government response to the pandemic has been efficacious, we are seeing a commercial tailwind,” Chief Operating Officer Shyam Sankar said on the earnings call. “In the U.S., in particular, we continue to generate exceptional results, where revenue grew 83% in the U.S. government and 72% in commercial. And we have a lot of headroom for growth in these markets.”
PLTR Stock Technical Analysis
PLTR stock is more than 50% off its Jan. 27 peak. But it’s still up nearly 200% from its Sept. 30 debut, when Palantir launched a direct listing priced at 7.25 a share.
In a traditional IPO, companies create new shares, underwrite them and sell them to the public. A direct listing creates no new shares and sells only existing, outstanding shares with no underwriters involved.
Palantir stock quickly formed a four-week IPO base, which it cleared in late November. After a 191% run from the 11.52 buy point, the stock built an eight-week consolidation. A subsequent breakout yielded a 34% gain from the 33.60 entry, before shares began pulling back.
Palantir stock’s 80 Relative Strength Rating means it’s in the top 20% of all stocks. The relative strength line, which compares a stock’s performance to the S&P 500, is off its Jan. 27 peak. A move into new high ground at or ahead of a potential breakout would be a bullish sign.
A D- Accumulation/Distribution Rating points to more recent net selling vs. buying by mutual funds.
As of March 31, 180 mutual funds owned Palantir stock. Those taking new positions and earning an A or A+ from IBD include American Beacon ARK Transformational Innovation Fund (ADNPX), Alger Large Cap Growth Portfolio (AAGOX) and Monetta Fund (MONTX).
Recent IPO Palantir continues to post double-digit sales growth and is expected to turn its first annual profit this year. The software maker aims to expand its commercial business, since government agencies are the chief growth driver. It recently began accepting Bitcoin as payment and may invest in the cryptocurrency.
Palantir stock is more than 50% off its high and has been stuck below its 50-day moving average since mid-February, according to MarketSmith chart analysis. Wait to see if it can retake and hold above its 50-day line. That could kick-start the right side of a deep base. So PLTR is not a buy right now.
But with Palantir scoring its first profitable quarter and the stock turning up, it’s a promising watchlist candidate. Also keep an eye on the overall market. The market uptrend is currently under pressure, which makes all purchases riskier than usual. Read The Big Picture for detailed daily market analysis.
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Follow Nancy Gondo on Twitter at @IBD_NGondo
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