4 Palantir Analysts Debate Data Analytics Company's Mixed Q4, Eye End Of Lockup Period

Palantir Technologies Inc PLTR shares lost 12.75% Tuesday in reaction to mixed fourth-quarter results. Here's what the Street has to say. 

The Palantir Analysts: Goldman Sachs analyst Christopher Merwin upgraded Palantir from Neutral to Buy and increased the price target from $13 to $34.

Morgan Stanley analyst Keith Weiss maintained an Underperform rating and upped the price target from $17 to $19.

William Blair analyst Kamil Mielczarek downgraded the stock from Market Perform to Underperform.

Credit Suisse analyst Brad Zelnick maintained an Underperform and  lifted the price target from $17 to $20.

Goldman Sees Better Visibility On Palantir's Growth: Palantir reported fourth-quarter revenue and EBIT that came in ahead of Goldman's estimates, Merwin said in a note.

The revenue guidance of 30%-plus growth for 2021 suggests a deceleration throughout the year, the analyst said. 

The management's guidance for $4 billion in revenue for fiscal year 2025, implying a 30% CAGR from fiscal year 2020, is encouraging, he said.

Along with the growing backlog of $2.8 billion in deal value, there is also increasing visibility into the achievability of Palantir's long-term target, Merwin said.

The efforts to modularize Foundry and add channel partners like IBM Common Stock IBM should improve Palantir's market fit for commercial business in the coming quarters, the analyst said. 

"With improving visibility into near- and long-term growth, we believe PLTR should trade more in line with 30%+ growth businesses, which are trading at 44x CY21 sales, our new target multiple for PLTR on SNTM sales."

Related Link: Palantir To Debut New Software, Apps At Inaugural Demo Day

Morgan Stanley Says Risk-Reward Skews Negative: Despite the number of $10 million-plus customers increasing 50% year-over-year, the total customer count for Palantir remained little changed at 139 customers in 2020 versus 135 customers in 2019, Weiss said in a note. 

The investment into the opportunity seems limited, as adjusted opex growth for the quarter was down 29% year-over-year, the analyst said.

Palantir's revenue growth trajectory is also confounding, as revenue growth that fell from 52% in the third quarter to 40% in the fourth quarter is expected to rebound to 45% in the first quarter before slowing to 30%-plus in 2021, he said. 

Overall, Palantir showed good durability in its government business, signs of progress on commercial distribution and sustained, significant strides in profitability, Weiss said.

The 1.3 times enterprise value/sales/growth multiple for Palantir shares is well ahead of the SaaS group at 0.7 times, skewing the risk/reward negatively, Morgan Stanley said.

William Blair Sees Near-Term Risks For Palantir: The 30%, five-year CAGR implied by Palantir's guidance assumes growth in line with the fastest-growing horizontal software providers in history, Mielczarek said in a note. 

The current valuation does not fully price in all near-term risks, the analyst said. 

Palantir's Government segment, which has been growing at exceptionally strong rates, has been heavily supported by U.S. Army contracts won in 2019, and Commercial revenue growth has decelerated to 4% year-over-year, he said. 

"New sales efforts, partnerships, and the move to modularization are gaining promising traction but are still too early stage to give us confidence that the company can exceed its long-term growth targets without near-term volatility." 

Additionally, William Blair sees the expiration of the lock-up period later this week as likely to dramatically increase the supply of Palantir stock and bring the price down.

Credit Suisse Looks For Evidence Behind Palantir's Goals: Fiscal year margin guidance was not provided in Palantir's report, calling into question the sustainability of recent margin expansion, Zelnick said in a note.

Despite Palantir's long-term guidance, the analyst said he wants evidence of leading indicators to gain comfort in the company's ability to achieve that goal.

"With shares trading at 35x EV/CYE 22 rev., (4x premium to high growth software) and 80% of the float becoming free to trade on 2/18, we remain Underperform."

PLTR Price Action: At last check, Palantir shares were advancing 2.8% to $28.62. 

Related Link: Morgan Stanley Downgrades Palantir, Says Risk/Reward Paradigm Shifts Decidedly Negative

A screenshot of Palantir software.