Palantir stock was trading sharply higher in US premarket trading today. The stock had gained over 6% on regular trading on Friday also after it expanded its partnership with energy giant BP.
On Friday, Palantir announced that it has extended its partnership with BP for five more years. “Palantir will provide its software to bp at the enterprise level, with global deployment across the organization in a multi-year, multi-million dollar deal,” said the company in its release.
Palantir stock rises after expanding BP deal
The deal with Palantir would help BP, which released its quarterly earnings last week, become zero-emission company latest by 2050. The two companies already have a partnership that Palantir says has “already delivered significant value and enhancements in hydrocarbon-based workflows.” It added, “Now, there are opportunities to apply these applications to accelerate bp’s new ambition, optimizing wind farms, electric charging networks, solar generation, and supporting the achievement of other aspects of bp’s net zero aims.”
Palantir helping BP reach carbon neutrality
We started this company to work on the hardest problems,” said Palantir’s COO Shyam Sankar. He added, “Helping deliver energy more safely and efficiently, in a disrupted market, while supporting the transformation of a business the size and scale of bp, is exactly what we built this platform to do.”
Notably, big deals like that with BP would Palantir diversify its business as currently most of its revenues come from governments. Last year, Palantir had signed a multi-year partnership with global mining giant Rio Tinto also.
Citigroup downgraded the stock
Last month, Citi downgraded Palantir to sell from neutral over the valuation concerns. “After a 150+% rise in the stock since the September direct listing, we believe the stock is vulnerable heading into 2021 with the upcoming lockup expiry, and an expected deceleration in growth. Specifically, we see risk around the lapping of COVID-19 related contracts, which have the potential to become headwinds in 2H21 into 2022,” said Citi analysts.
Palantir partners with IBM
Palantir has now partnered with IBM that would help it expand its sales staff. “This is the biggest [partnership[ we’ve announced — expect more,” said Sankar as he expects the company’s direct sales team to expand to 100 this year or triple from the current levels.
Palantir’s earnings are coming
Palantir would report earnings on 16 February and its lockup period would expand three trading days after that. Analysts expect Palantir to post revenues of $310 million in the fourth quarter, a year over year rise of only about 4.5%. However, it is expected to post a GAAP loss of 14 cents per share. While filing for the IPO, Palantir had noted that “We have incurred losses each year since our inception, we expect our operating expenses to increase, and we may not become profitable in the future.”
Should you buy Palantir stock?
Palantir stock trades at an NTM (next-12 months) enterprise value to revenue multiple of 45x that looks high. However, investors have been bullish on the stock despite it not reporting high growth rates. It is a long-term story built around big data and analytics so the NTM numbers might not reflect the true valuation.
Analyst action
Wall Street analysts are not optimistic about the stock either. It has an average price target of $16.29 which is a discount of over 52% over current prices. Its highest price target is $30 while $10 is its lowest price target. Of the eight analysts covering the stock, only one has rated it as a buy or equivalent.
Four have rated it as a hold while the remaining three rate it as a sell or lower. Last month, Jefferies, which is bullish on Palantir, raised its target price to a street high of $30. Citi downgraded the stock while William Blair initiated coverage with a market perform rating.
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