Stock Market

Data mining firm Palantir (NYSE:PLTR) has taken its investors on a wild ride since going public last September. The volatility in PLTR stock raises concerns about its risk.

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The reality is that the company has a highly compelling business model with solid competitive strengths. It finds itself in a unique position in the big data boom and is poised to deliver attractive returns to its investors in the long run.

From it’s $10 initial public offering, PLTR stock rallied in November when the Reddit’s r/WallStreetBets crowd caught on to the name and pushed the shares to a high of $45 a share by January. However, the short interest has evaporated since then, which leads me to believe that it never fit the description of “meme stock” to begin with.

The company has multiple growth drivers and has barely started capitalizing on its future opportunities.

Stellar Financials Underpin PLTR Stock

Robust revenue growth and solid profitability are two key elements of financials underpinning PLTR stock. This is apparent in its blowout first-quarter results.

It posted revenues of $341 million, which represented a whopping 48.7% year-over-year increase in revenues. Moreover, its adjusted operating margin of 34% came in significantly better than its guidance of 23%. For Q2, Palantir expects a massive $360 million in revenues with an adjusted margin of 23%, exceeding consensus estimates again.

Palantir’s earning results show that its Gotham platform is a mainstay in the U.S. Government’s technological infrastructure. Moreover, the burgeoning investments in artificial intelligence by communist China have made Gotham more germane than ever.

In the first quarter, the company’s government revenue rose by a spectacular 76%, mainly fueled by an 83% growth in its federal government business. However, its U.S. commercial revenues complemented the incredible government performance, with a 72% growth from the prior-year period. Hence, the company has re-iterated its long-term guidance of over 30% sales growth through 2025.

Positive Recent Developments

Palantir has built an incredible head of steam as it moves to the second half of the year. During the first half of the year, it has been highly active, scoring major contracts and partnering with some pertinent companies.

It announced its strategic partnership with AI platform, DataRobot, to support small- and medium-sized enterprises in leveling the playing field in the e-commerce realm. Their AI-powered demand forecasting model will enable smaller companies to minimize costs and gain access to previously cost-prohibitive capabilities.

Furthermore, the company renewed its disease surveillance contact with the U.S. Centers for Disease Control, worth $7.4 million. It also scored some major contracts with the National Nuclear Security Administration and the Space Force.

It also signed a contract with the Federal Aviation Administration worth $18.4 million to provide data analytics and advance the agency’s safety goals. On a side note, Palantir partnered with Grupo Global, the largest media company in Latin America. Grupo will use Palantir’s Foundry software to improve its advertiser sales and customer engagement.

As well, the company has become a major investor in at least eight special-purpose acquisition companies. Barron’s reported on July 2 that Palantir has participated in at least eight SPAC-related private investment in public equity (PIPE) transactions, investing more than $100 million, using the deals as a way to win business. “In effect, Palantir is providing capital up front in return for a multiyear commitments to use the company’s software,” reported Eric Savitz.

Bottom Line on PLTR Stock

Despite the PLTR stock rollercoaster ride, the company’s long-term bull case is intact and has widened over the past few months. It continues to push forward in expanding its private and public business.

It has some key partnerships, which will pay dividends down the road. Its long-term guidance is spectacular and should boost its stock price in the coming months.

All in all, despite the concerns surrounding its price movements, PLTR is a stock worth investing in for the long haul.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.