Analysts Diverge On Palantir After Results As Lock-Up Expiry Approaches

Shares of Palantir (PLTR) are on the rise after Goldman Sachs analyst Christopher Merwin upgraded the stock to Buy, citing the company's fourth-quarter results and first-quarter guidance that called for revenue growth of 45%. Still bearish on the name, Citi analyst Tyler Radke kept a Sell rating on Palantir as he sees "signs of growth drivers narrowing with new customers growth still lacking and commercial revenue missing expectations."

RESULTS: On Tuesday, Palantir reported fourth-quarter losses per share of (8c) and an adjusted profit of 6c per share, including stock-based compensation, with consensus at 2c. The company reported revenue of $322M was better than the expected $300.74M. Palantir also said it sees first-quarter revenue growth of 45% and adjusted operating margin of 23%. For fiscal year 2021, the company expects revenue growth greater than 30%.

BUY PALANTIR: Goldman Sachs analyst Christopher Merwin upgraded Palantir Technologies to Buy from Neutral with a price target of $34, up from $13. The analyst noted that Palantir reported "strong" fourth-quarter results and its first-quarter guidance called for revenue growth of 45%, while fiscal 2021 revenue guidance was for 30%-plus. Further, Merwin is "encouraged" to see management guide to $4B of revenue in fiscal 2025, implying a 30% annual growth from fiscal 2020. With a growing backlog of $2.8B in deal value, there is increasing visibility into the achievability of that long-term target, he added. Further, the analyst believes Palantir's recent efforts to modularize Foundry and add channel partners like IBM "should improve product-market fit" for the commercial business in the coming quarters.

Keeping a Buy rating with a $40 price target on the stock, Jefferies analyst Brent Thill noted that Palantir reported a top and bottom-line beat in the fourth quarter along with "robust" large deal metrics and said it is targeting $4B or more in 2025 revenues. Nonetheless, he believes the stock remains under pressure due to Thursday's lock-up expiry and the recent run-up that saw the stock up 35% year-to-date ahead of the report. Thill views Palantir as "a highly unique story for long-term investors" given its growth sustainability at significant scale and "aggressive profitability ramp" that puts the stock "in rarified air" among software companies.

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