Palantir Stock Looks Like Good Value At $9

PLTR: Palantir Technologies logo
Palantir Technologies

Big data and analytics player Palantir Technologies stock (NYSE:PLTR) has rallied by almost 20% over the last month, considerably outperforming the S&P 500 which was up by just about 3% over the same period. There are a couple of factors driving the recent gains. Firstly, investors are likely seeing a lot more value in Palantir stock, which now remains down by over 50% year-to-date, and by almost 75% from its 2021 highs. Palantir has also struck up multiple deals of late with clients including auto major Stellantis, waste and recycling software provider Rubicon Technologies, and global commodities trader Trafigura. The company’s government business also won a large follow-on contract from U.S. Space Systems Command, a division of the U.S. Space Force. Investors likely see these diverse deals as a testament to the company’s strength in the AI and big data space.

Now, there are clearly some risks for Palantir stock. The company’s revenue growth is slowing down, with the company projecting base case revenues of $470 million for Q2 2022, marking a growth of just about 25% year-over-year, down from 49% in the year-ago quarter. Moreover, the market’s continued pivot away from unprofitable and high-multiple stocks could also hurt the company as interest rates continue to rise and U.S. GDP growth slows down. That said, we think that the risk to reward tradeoff for Palantir looks quite compelling at current levels. Despite the potentially transitory headwinds in the current environment, Palantir’s long-term outlook remains intact. The company continues to project annual revenue growth of 30% or greater through 2025, and there could be an upside to this considering the longer-term geopolitical ramifications of the Russia-Ukraine conflict, and also as artificial intelligence plays a greater role in the economy. At the current market price, PLTR stock trades at just under 9x  consensus 2022 revenue and just about 7x 2023 revenue estimates, which is actually well below the broader software sector despite the company’s above-average growth.

We estimate Palantir Valuation at about $15 per share, translating into a potential upside of over 60% from the current market price. Check out our analysis of Palantir Revenue for more details on Palantir’s key revenue streams and business model.

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