Over the last few years, businesses have begun to realize the importance of data and understand how it can change the way companies work. If we consider the growing demand for data in the U.S., and indeed the world, Palantir (NYSE: PLTR) stock looks like a great long-term investment for investors wanting a slice of the highly profitable big data analytics pie.
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Palantir stock has been on a bit of a rollercoaster lately. Down nearly 8% over the last month, the stock is still up almost 128% since its market debut last September.
Why is Palantir a great long-term investment?
1. Palantir’s growing market
Palantir is making a name for itself in the software industry by signing some top-class deals with Silicon Valley’s finest, including recent contracts with IBM and Amazon’s (NASDAQ:AMZN) AWS. However, these contracts make up only a small portion of the market share potential, meaning there is still plenty of room for growth for Palantir. The Denver-based company has logged 21 contracts in Q4 valued each at over $5 million recently, proving Palantir’s strong market influence.
The company’s fast growth was also proven in its most recent earnings report. Palantir reported revenue of over $1 billion for 2020 and $332.1 million for Q4, up from the $229.36 million in the year-ago period. In addition, Palantir said it expects to reach $4 billion in revenue by 2024, which represents an annual growth rate of 30%. These figures and impressive deals combined should make investors sit up and pay attention to the company.
2. Winning government clients
Palantir is known as one of the top providers of data analytics in the industry to some big government agencies.
Government contracts are Palantir’s largest revenue driver, with 56% of the company’s total revenue in Q4 2020 coming from the public sector. Palantir explained that its government segment generated $190 million in revenue in Q4, up 85% from the previous year, while its commercial contracts brought in $132 million, up only 4% from the year-ago period.
Experts estimate that demand from government agencies is only going to increase in the coming years, which is great news for Palantir. The technology company is already helping with the Brexit border, working with the UK’s public healthcare sector, the NHS, and the U.S. government. During the pandemic, Palantir was also contracted by the U.S. Department of Health and the British National Health Service to help control the flow of coronavirus-related data.
Many have criticized Palantir for going after government contracts, but smart investors also realize that these types of clients give the company stable income that they can rely on.
Should I invest in Palantir?
With a market cap of over $40 billion, the stock may look a little overvalued at the moment considering that Palantir is yet to report a profit. However, many shareholders believe that it’s Palantir’s massive growth opportunities, discussed above, that justify the company’s high valuation.
Given the company’s growing dominance in both the commercial and government sectors, the stock is becoming more of a solid investment for long-term investors.
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