It’s well-known by now that many stocks have seen far better days, as over the past year, valuations have often contracted by huge amounts. While shareholders have suffered at the hands of the violent pullbacks, many names now provide enticing entry points.
Which brings us to Palantir (PLTR), a name now trading some distance below former highs, as noted by Raymond James’ Brian Gesuale, who smells opportunity.
“After falling ~73% from its early 2021 peak,” said the 5-star analyst, “we see the risk/reward as compelling for a software business with a ~30% growth rate, gross margin structure in the 80% range with escalating contribution margins, and a balanced commercial and government customer mix.”
The last point is telling as critics of Palantir have often used its dependence on big government contracts and lack of exposure to the commercial sector as the stick with which to beat the big data specialist.
It’s true Palantir has set its sights on gaining entry to an exclusive club by becoming only the fifth government prime contractor for the U.S. government. The company believes this is a market opportunity of ~$63 billion, although Gesuale thinks it could be “substantially larger.”
In the next few years, it seems possible that federal revenue might increase from its present level of about $850 million to $5 billion if Palantir can expand its platform and keep growing.
But Gesuale differs from the naysayers given his belief there is also a big opportunity in the commercial sector. To broaden its appeal, the company has had to adjust its purpose-built software platform Foundry, which was launched to cater to the sector. This has taken time but now the implementations have become “more modular, scalable, and faster to implement without meaningful customization.” It’s a market Gesuale reckons is worth $56 billion, which targets more than 6,000 companies with revenue above $500 million. Palantir currently boasts 184 commercial customers, which have more than tripled since 2019. Gesuale anticipates the company will “continue to aggressively add customers and scale existing customers into bigger revenue clients with incremental penetration of offerings.”
Based on all the above, Gesuale initiated coverage of PLTR stock with a Strong Buy rating and $20 price target. The implication for investors? Upside of 91% from current levels. (To watch Gesuale’s track record, click here)
Turning now to the rest of Wall Street, where 3 others run with the bulls (Buys) while 3 others are running away (Sells), but the rest – 6, in total – prefer to watch from the sidelines, all providing this name with a Hold consensus rating. Going by the $12.04 average target, there’s room for gains of 15% in the year ahead. (See Palantir stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
