Stock of the Week: Palantir

It’s not the Matrix

Andrew Willis 14 December, 2020 | 4:38AM

 

 

Andrew Willis: With almost everything going virtual with the pandemic, governments and organizations lost access to in-person information gathering. Enter Palantir, a data-company that entered the public markets with just the solution and a some self-promotion – but is it the best investment in Big Data right now?

Palantir started as a consulting-led company, with strong government ties and arrangements that allowed it access to swathes of public – and private - data. It then focused on processing this data with the help of artificial intelligence and now delivers it in the form of easy-to-use turn-key software.

Equity analyst Mark Cash says that Palantir is well-suited to help organizations harness the power of data in a largely untapped market. He sees compound annual growth of around 34% over the next five years – which is great, but far less than what the stock price suggests.

With buzzwords like Cloud-based’, ‘artificial intelligence’, ‘Big-data’, and ‘software-as-a-service’, the stock soared… even though the company is yet to be profitable.

Investors should remember that Palantir isn’t the be-all and end-all for Big Data. The company may have shown its cards when it sued the U.S. government for seeking to build its own in-house data-processing solution. Moreover, it doesn’t own the data and is at the whim of data being provided to provide its services.

Commercials interests, however, are happy to provide data when they don’t need to build their own software, and that’s where we see significant growth going forward. At the same time, nothing is stopping commercial interests from copying the entire business model…

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Palantir Technologies Inc Ordinary Shares - Class A25.64 USD2.89

About Author

Andrew Willis

Andrew Willis  is Content Editor for Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.

 

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