Palantir's addressable market is heavily skewed toward large agencies and companies, which some could view as a limitation. Investors also debate whether the firm has outgrown its consulting origins and can be valued as a true software company. Palantir gives less information on its deals than its competitors do, hindering analysts' ability to gauge its valuation. The underwhelming performance could be a result of unfair discounting, Morgan Stanley said in a note to clients. ![]() The stock closed at $9.95 on Monday, below the $10 level Palantir began trading at. The data-mining firm's shares haven't met investors' lofty hopes in their first month of trading. PLTR Price Action: Palantir shares were up 2.32% at $9.71 at last check Monday.Morgan Stanley analysts initiated coverage of Palantir shares with an "overweight" rating on Monday, saying the firm is undervalued as investors fail to realize its full potential. With just about 125 customers presently, lumpy deals and limited visibility into future pipeline conversion, Palantir will likely trade at a discounted multiple relative to comparable growth peers, according to Goldman. "We have been encouraged to see contribution margin surge to 53% in FY20E from 21% in FY19, largely due to a reduction in implementation times and operating cost reductions." Palantir's positioning in the commercial space will be challenged, given the proliferation of cloud-native database and BI tools, the analyst said. government, offering solutions where none were available before to aid in intelligence, counterterrorism and military readiness, Merwin said in an initiation note. Goldman On Why Palantir Will Trade At Discount: Palantir has found its best fit in the U.S. On the flip side, a lack of disclosures around historical trends as well as KPIs reduces confidence around the sustainability of growth and profitability, the analyst said.Ĭredit Suisse said it awaits more evidence of the company's ability to diversify its customer base and grow profitability. Palantir puts its market opportunity at $119 billion, with top down estimates validating a large and growing market, he said.Īnalytics are a top spending priority, second only to security, Zelnick said. Palantir has many high value applications across many high value industries in the private sector, the analyst said. "We also see a path to software-like long-term margins of 35%+ as growth slows to ~11%."Ĭredit Suisse Wants More Evidence Of Growth: Palantir's technology and differentiation are uniquely defined by their use cases, such as integrating cross agency intelligence data to help uncover and catch terrorists and saving soldiers' lives by identifying areas where IEDs may be planted, Zelnick said in an initiation note. Success with commercial enterprises could represent upside to estimates, the analyst said. Morgan Stanley sees room for Palantir to sustain top-line momentum, particularly in the government segment. "As such, we see the level of discount to peers implied by current trading as too severe, creating an attractive risk/reward," Weiss said. Related Link: Cathie Wood's Internet ETF Sells Some Tesla, Xilinx, Buys The Dip In Fastlyĭespite this unique combination of accelerating revenue growth and quickly expanding margins, Palantir shares are trading at a discount to peers, he said. This has helped margins ramp rapidly over the last year, shifting the company's positioning more toward software from being a consulting/services firm, the analyst said. The introduction of the Apollo continuous delivery platform has reduced the time and number of engineers needed to install, deploy and manage the customer-facing platform, Weiss said.
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