Palantir upgraded to ‘buy’ with a fresh $34 price target from Goldman Sachs after revealing ‘sustainable growth’ in latest earnings

Palantir
Palantir logo on New York Stock Exchange. Noam Galai/Getty Images
  • Palantir posted a surprise loss in its fiscal fourth-quarter earnings on Tuesday, causing the stock to fall.
  • Goldman Sachs analysts thought the quarter was stronger than expected and raised their price target to $US34 ($44) per share.
  • The analysts cheered Palantir’s government revenue, margin expansion, and backlog visibility.
  • Cathie Wood’s ARK Next Generation Internet ETF also bought 1.56 million shares of PLTR on Tuesday after the fall.
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Palantir Technologies received a fresh “buy” rating and a $US34 ($44) price target from Goldman Sachs on Wednesday.

While the big data analytics firm’s stock took a tumble on Tuesday after earnings revealed a surprise loss, analysts at Goldman were pleased with the quarterly results, saying the company now has a path to “sustainable growth”.

The analysts, led by Christopher D. Merwin, CFA, said Palantir posted “strong FQ4 results” that beat their revenue and EBITDA expectations by 6% and 115% respectively.

They also noted Palantir’s robust revenue guidance and backlog of orders going into 2021.

“We were encouraged to see management guide to $US4bn of revenue in FY25, implying a 30% 5-year CAGR from FY20,” Merwin said. “With a growing backlog of $US2.8bn in deal value (+31% y/y), we believe there is increasing visibility into the achievability of that long-term target.”

Government revenue was another bright spot for Palantir in its most recent earnings report, rising 85% year-over-year to $US190 ($245) million. The company signed 21 deals worth over $US5 ($6) million with contractors during the quarter compared to just 15 a year ago.

Goldman analysts also said they expect the margin expansion of 63 points seen in the quarter to continue going forward, leading the group to model 23% non-GAAP EBIT, up from 17%.

Furthermore, Goldman said Palantir’s deal with IBM to “should help to grow what is a relatively small commercial customer count today.”

Palantir’s quarterly results were enough for Goldman to more than double its price target from $US13 ($17) per share to $US34 ($44). The company should now “trade more in line with 30%+ growth businesses, which are trading at 44x CY21 sales” according to Merwin and his team.

Goldman’s price target implies a 22% potential return from Tuesday’s closing price. Perhaps that’s why Cathie Wood’s ARK Next Generation Internet ETF bought up 1.56 million shares on Tuesday after the fall in share prices.

Palantir’s stock has risen nearly 200% in the last six months amid a bull market for equities. However, the company saw its shares fall from all-time-highs of over $US39 ($50) per share on Jan. 27.