Palantir (NYSE: PLTR) Impresses Wall Street With 70% Run In First Month Public

After 17 years in the business, big data firm Palantir (NYSE: PLTR) finally went public at the end of September. It’s been a while coming but has certainly paid off big already for any early investors or those who got involved once shares hit the secondary market. The stock closed out last week up a full 70% from its first day as investors continued to chew on the company’s first public earnings report which was released after Thursday’s bell.

Prior to their IPO, management had forecasted Q3 revenue to be in the range of $278-280 million and the official print of $289 million raised more than a few eyebrows for all the right reasons. This represents year-on-year growth of 52% and is exactly the kind of number you want to see in a tech company that’s bold enough to go public after a decade or two in the private sector. Now that being said, their Q3 EPS came in way off the mark and took the shine from what was otherwise a stellar report. Instead of the -$0.17 loss that analysts were expecting, -$0.94 was reported and a lot of questions will need to be answered in the coming days.

Still, there were more pros than cons and despite the deeping losses seen in EPS, management saw fit to increase their forward guidance for the full-year revenue, which they’re expecting to be up 44% compared to 2019. The average revenue generated per customer over the first nine months of the year was also up a healthy amount, a juicy 38% in fact compared to the same period last year.

Some additional highlights in the report including new contracts won with the U.S. Army and the National Institutes of Health to the tune of $91 million and $36 million respectively and a $300 million contract renewal with an existing aerospace customer.

Palantir has made quite the foothold for itself in the defense contractor space, positioning itself as a lower cost solution compared to some of the more established players. This has become an important factor in Wall Street’s perception of the company’s potential, particularly with Joe Biden set to take over in the White House next January. Many are expecting the President-Elect to introduce defense budget cuts which would force organizations to consider lower cost alternatives, like Palantir.

There are some on Wall Street who think the current valuation is a little frothy relative to last week’s numbers and so are urging caution. On Friday, Morgan Stanley cut the company’s rating from Overweight to Equal-Weight, suggesting that shares are right around where they’re supposed to be after October’s blistering run. Analyst Keith Weiss still struck a positive note in terms of the company’s revenue growth, newly won contracts, and operating margin strength in the "solid first quarter out of the gate."

It’s worth noting that at the same time he also increased his price target on Palantir stock from $13 to $15, in line with where the stock opened that day. So while it wasn’t a wholly negative move by the sell-side firm, their cautious move is definitely worth consideration by any investor thinking about getting involved at these levels.

On the flip side of that news on Friday, came an update from George Soros’ fund who, as part of a general portfolio reshuffle in Q3, opened up a position in Palantir stock. It’s always nice to have a heavyweight on your side and there are few who attract more attention than George Soros. It will be interesting to see how the rest of Wall Street reacts to last week’s earnings over the coming days. You can be sure that there’ll be a few fresh updates before the earnings report is a week old.