Shares of controversial big data software developer Palantir (PLTR) have had a good week, following Tuesday’s news that the firm had secured a contract with the U.S. Army worth $823 million.
This comes amid a brutal tech-focused sell-off. (See Insiders’ Hot Stocks on TipRanks)
While shares of PLTR are likely to face amplified damage if this sell-off is far from over, I remain bullish on the name because it has a moat that’s far wider than most investors think.
Unfathomable Growth Prospects
The cloud of secrecy surrounding Palantir makes it a bit harder to evaluate the firm, and market opportunity at hand. However, it’s such secrecy that’s so alluring to many growth investors who want a front-row seat to the big data boom, one of the hotter next-generation technological trends.
There aren’t many ways to play the space. In terms of big data, Palantir is arguably the name that will draw the most attention around the watercooler, especially after its latest contract win.
The company is behind an incredible data analytics technology that, in many ways, is akin to the one used in the science-fiction film Minority Report.
Indeed, data is evolving to become an invaluable commodity. In the right hands, it could have profound applications across a wide range of industries, from optimizing corporate operations, to next-generation warfare, to even predictive policing.
Palantir’s Moat
Undoubtedly, Palantir’s close ties with the U.S. government have made the company less transparent than most other easier-to-understand tech companies. Still, it’s Palantir’s government focus that should be viewed as a vital moat component to the firm’s business.
Such a moat could be insurmountable for many competitors in the big data space, especially those focused on the commercial side of analytics.
When working with the government, there has to be trust and an oath to secrecy. With that, government contract work is a vertical that could prove too far out of reach for many of today’s non-government-focused tech firms, even those on the cutting edge of AI and data analytics technology.
Alphabet’s (GOOGL) Project Maven faced significant hurdles that proved to be too high when it looked to secure a contract with the Pentagon around three years ago. Ultimately, Palantir stepped in and won the business.
As Palantir looks to make its offering more readily available to non-government entities, the company could have the ability to go on the offensive without having to worry too much about losing government contracts, specifically those revolving around defense.
Valuation
The latest U.S. Army contract is just another big win for a company whose moat seems to be growing with time.
However, with shares trading at 33.1 times sales, PLTR stock could be vulnerable to any further NASDAQ-led weakness.
Wall Street’s Take
According to TipRanks’ analyst rating consensus, PLTR stock comes in as a Strong Buy. Out of six analyst ratings, there is one Buy recommendation, two Hold recommendations, and three Sell recommendations.
The average Palantir price target is $24.20. Analyst price targets range from a low of $18 per share, to a high of $31 per share.
Disclosure: Joey Frenette doesn’t own shares of any mentioned companies at the time of publication.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.
