Could the Palantir share price soar in Spring?

The Palantir (NYSE: PLTR) share price struck a record $35 per share on 29 January 2021, as the data analytics company was carried along with the tidal wave of Reddit-based meme stocks. But over the past year, it’s fallen more than 50% to under $17 today.

However, when the company was first listed in September 2020, it started trading at only $10 per share. And strong Q3 earnings alongside multiple new contracts could see it soar into 2022.

Palantir share price: Q3 results

Named after the seeing stones in Tolkien’s Magnum Opus, ‘The Lord of the Rings,’ Palantir ‘builds platforms for integrating, managing, and securing data on top of which we layer applications for fully interactive human-driven, machine-assisted analysis.’ And this business formula appears to work well.

In Q3 results, Palantir boasted impressive revenue growth of 36% year-over-year to $392 million. And as it diversified away from government contracts, commercial US revenue grew by 103%. Moreover, it added 34 net new customers, increasing its commercial customer count by 46% quarter-over-quarter.

And after closing 54 new deals, including 18 worth $10 million or more, the total value of all its deals has grown 50% year-over-year to $3.6 billion.

For long-term investors, this is just the latest positive quarterly result. Year-to-date, revenue is up 44% year-over-year to $1.1 billion, while its commercial customer count has increased 135% since December 31, 2020. FY21 revenue growth is expected to increase by 40% to $1.53 billion and CEO Alex Karp believes revenue will continue to increase by 30% per year through 2025.

Moreover, Palantir has announced a host of new deals since these results, with both governmental and commercial operators. Most recently, it signed a memorandum of understanding with Hyundai Heavy Industries (HHI) ‘to build a big data platform for HHI’s core businesses, including shipbuilding and offshore engineering.’ Long-term, the companies ‘plan to create a joint venture that specializes in developing and selling big data platform services.’

HHI is working on a ‘Future of Shipyard’ project to transform itself into a ‘first of its kind’ smart shipyard by 2030. CEO Kisun Chung expects the partnership ‘will substantially improve the competitiveness of core businesses of the Group.’

The data analytics company has also announced a strategic partnership with BigBear.ai and signed a multi-year agreement with North American energy infrastructure giant Kinder Morgan. Palantir COO Shyam Sankar believes ‘energy companies like Kinder Morgan have vast amounts of data from disparate sources that rarely interact, and we believe Foundry is the best tool on the market to solve this complex problem.’

And the company has also agreed a new partnership with Dewpoint Therapeutics, helping analyse lab data to identify new compounds and therapeutic approaches. Palantir’s Head of Biotech Lalarukh Haris Shaikh believes Dewpoint required ‘a game changing solution that goes beyond just cloud and infrastructure.'

Palantir share price: Contracts and contractions

Away from the commercial front, Palantir has also strengthened its position as a contractor to the US government. It’s secured an additional $43 million contract from the US Space Systems Command to continue its delivery of a data and decision platform to support national security objectives. And the US army has opted to continue using Palantir’s Army Vantage data analytics platform for a second year, as part of a $458 million contract. Palantir Global Defense Lead Doug Philippone highlighted how ‘this partnership reinforces what industry and government can do at speed to solve hard problems.’

And with its share price continuing to fall, Cathie Wood’s ARK Invest has purchased a combined 442,456 Palantir shares so far this year, worth over $8 million. It’s not hard to see why— Palantir is everywhere, from shipbuilding to energy, to Biotech, to defence.

But there are some issues for the stock. Many of its business partnerships remain clandestine. And for the commercial partnerships it does announce, numerous financial details are kept tightly under wraps.

Moreover, its explosive growth is reliant on continued loose monetary policy. And in Federal Reserve committee minutes released yesterday, the US central bank has decided to taper its quantitative easing program even faster than previously announced. Moreover, with the Reserve’s balance sheet having doubled to $9 trillion since 2020, it believes interest rates may need to rise ‘sooner or at a faster pace.’

This puts Palantir in a complex place. While the business is growing fast, interest rates will be rising soon. Its share price could soar in Spring, but only if it's matured fast enough to cope with the increased cost of debt.

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*Based on revenue (published financial statements, 2022).