Palantir Technologies: Intriguing SPAC Investments

Palantir Technologies (PLTR) provides cybersecurity and related software and services to governments as well as private businesses. I am bullish on PLTR stock.

Although PLTR has only recently captured investors’ attention, the company has been around for a while. Based in Denver, Colorado, Palantir was founded back in the early 2000s by Peter Thiel and other business experts.

Palantir offers three platforms, including Palantir Gotham (which targets government agencies), Palantir Metropolis (mainly for financial institutions), and Palantir Foundry (typically used by corporate clients).

As we’ll see, the company is on solid financial footing. Furthermore, Palantir is making some interesting investments into companies going public via SPACs, or special-purpose acquisition companies. (See Palantir stock charts on TipRanks)

A Quick Look at PLTR Stock

The fourth quarter of 2020 was truly amazing for Palantir’s investors. The PLTR share price more than doubled, from $10 to $23 by the end of the year.

Early 2021 was also auspicious, as PLTR stock hit the $39 area in January, and then again in early February. However, that level turned out to be a stubborn resistance point.

From March through August, PLTR stock traded sideways and eventually settled near $26. This has been frustrating for the Palantir bulls, no doubt.

Meanwhile, Palantir’s trailing 12-month earnings per share was -79 cents. That’s negative but not terrible when the stock is in the $20s.

If Palantir stays on the right financial track, the company should be able to achieve a more favorable earnings profile.

Meeting and Beating the Forecasts

Judging by Palantir’s recent fiscal performance, it’s reasonable to believe that the company is showing some improvement.

Palantir released its second-quarter 2021 fiscal data on August 12. Reportedly, the company met Wall Street’s expectation of earning 4 cents per share for the quarter.

It only gets better from there, as the analysts had forecast quarterly sales of $360.3 million but Palantir delivered $375.6 million.

A notable highlight was Palantir’s quarterly government revenues. That figure increased 66% year-over-year, to $232 million. Moreover, this result exceeded Wall Street’s estimate of $219.3 million.

Additionally, Wolfe Research analyst Alex Zukin pointed out what might be Palantir’s most impressive result of the quarter.

“Bookings were… strong, with the company revealing a new financial metric (total contract value) of $925 million, up 175% year over year in the quarter,” Zukin commented.

Investing in Innovative Companies

In order for a tech-infused business like Palantir to stay ahead of the competition, it must continue to pursue fresh, new ideas.

One way to accomplish this is to invest in innovative companies, which is exactly what Palantir is doing.

In particular, Palantir has invested in companies that are going public via SPACs. Therefore, these are not necessarily well-established businesses, and the investments are going to be somewhat speculative.

Still, Palantir’s move to commit $250 million towards 10 companies is bold and could provide substantial benefits to the stakeholders.

Just to provide an example, Palantir is investing $20 million in Fast Radius, which offers a “cloud manufacturing platform.”

Also, Palantir is committing $15 million to electric vehicle charger developer Tritium, plus $10 million to Asian financial-services company FinAccel.

It will be interesting to eventually find out which of these businesses provide the greatest returns to Palantir.

Wall Street Weighs In

According to TipRanks’ analyst rating consensus, PLTR is a Moderate Sell, based on 1 Buy, 2 Hold, and 3 Sell ratings. The average analyst Palantir price target is $23.80, implying 9.6% downside potential.

The Takeaway

It’s encouraging to see that Palantir is branching out into value-added SPAC investments.

These investments could provide the company with access to fresh, innovative technologies along with enhanced revenues

As a result, Palantir should be able to improve its earnings profile, leading to higher prices in PLTR stock sooner or later.

Disclosure: At the time of publication, David Moadel did not have a position in any of the securities mentioned in this article.

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William Murphy

William Murphy

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