Is Palantir Still a Top Growth Stock?
Not everyone follows the stock market. But if you read the news—financial or not—you’ll likely have heard about the meme stock frenzy earlier this year. Thanks to millions of Redditors—particularly those on the “WallStreetBets” subreddit—a bunch of so-called meme stocks shot through the roof.
Among the names that soared during that frenzy was Palantir Technologies Inc (NYSE:PLTR), an enterprise software company that specializes in big data analytics.
PLTR stock went public through a direct listing on the New York Stock Exchange on September 30, 2020, so it’s a very new ticker. However, the company managed to grab investor attention right from the start.
Take a look at the chart below.
Palantir stock opened at $10.00 per share on its first trading day. The stock traded sideways during its first month on the market, but quickly picked up momentum in November, reaching over $30.00 during the rally.
PLTR stock consolidated again in December and early January. And then, thanks to the meme stock frenzy, Palantir stock shot up, peaking at $45.00 per share on January 27.
Palantir Technologies Inc (NYSE:PLTR) Stock Chart
Chart courtesy of StockCharts.com
As I mentioned many times in my articles, parabolic runs don’t last forever. And that has been the case for all meme stocks—including PLTR stock. While it did have another surge in early February, it wasn’t able to reclaim its peak. Today, Palantir stock trades at just under $25.00 apiece.
Because of the erratic behavior of meme stocks, they’re known as high-risk plays. Simply put, there are days when there’s no news at all and these stocks can make double-digit-percent moves to either side.
That said, PLTR stock is more than just a meme stock. Yes, its share price is still volatile. But if you take a look at what the company has been doing, you’ll see that it’s running one of the fastest-growing businesses on the market.
In the second quarter of 2021, Palantir Technologies generated $376.0 million of total revenue. The amount represented a 49% increase year-over-year. (Source: “Palantir Reports 49% Revenue Growth; US Commercial Revenue Up 90% Y/Y,” Palantir Technologies Inc, August 12, 2021.)
Notably, the company’s U.S. commercial revenue rose by 90% year-over-year.
Palantir Technologies has been getting new business, adding 20 new customers in the second quarter. The company’s total customer count increased by 13% sequentially.
In the second quarter, Palantir Technologies Inc’s total contract value booked was $925.0 million. That’s up by 175% from the $337.0 million reported for the year-ago period.
The company also closed 62 deals of at least $1.0 million, 21 of which were $10.0 million or more.
However you look at it, Palantir’s business is firing on all cylinders.
And it’s not just its sales that have been on the rise. In the second quarter of 2021, Palantir Technologies Inc’s gross profit totaled $284.7 million, marking a 55% increase over the $183.5 million earned in the year-ago period.
Meanwhile, its adjusted earnings came in at $0.04 per share, compared to $0.01 per share reported for the second quarter of 2020.
Of course, what growth investors care about most isn’t what the company has done in the past, but what it can do in the future.
On that front, management has provided a rather cheerful outlook.
For the third quarter of 2021, they expect Palantir Technologies Inc to generate $385.0 million in revenue while achieving an adjusted operating margin of 22%.
Considering that the company’s revenue was $289.4 million in the third quarter of 2020, management is essentially forecasting a year-over-year top-line growth rate of 33% for the third quarter.
In the company’s earnings conference call, Palantir Technologies’ chief financial officer, Dave Glazer, said, “On the back of our strong first-half adjusted free cash flow performance and continuing momentum in the second half of the year[, we’re] raising full-year adjusted free cash flow guidance to an excess of 300 million.” (Source: “Palantir Technologies Inc. (PLTR) Q2 2021 Results – Earnings Call Transcript,” Seeking Alpha, August 12, 2021.)
Since management previously expected the company’s free cash flow to be at least $150.0 million this year, they are doubling the target on the metric.
In the fast-changing tech world, uncertainty remains a constant theme, but Palantir Technologies Inc is willing to provide a long-term outlook. The company expects annual revenue growth of 30% or greater for 2021 through 2025.
Going forward, PLTR stock will likely continue to be volatile. But with this kind of revenue growth, I’d say Palantir Technologies stock deserves all the attention it’s been getting.