Palantir (PLTR) Upgraded to 'Buy' at Goldman Sachs Following Strong Q4 Results

Shares of Palantir (NYSE: PLTR) are up about 2% in pre-open Wednesday after the company reported its fourth-quarter earnings.

Palantir topped the Street consensus for revenue but missed on profit expectations. Revenue surged by 40% to $322 million to beat the analysts’ estimates of $300.7 million and push full-year revenues over $1 billion.

However, investors were disappointed that PLTR reported a loss from operations of $156.6 million. Looking forward, PLTR expects to record revenue growth of over 30%. For the current quarter, Palantir is projecting revenue growth of 45% and an adjusted operating margin of 23%.

“We hope those of you on this call who are current investors stay with us and those of you who prefer a more short-term focus, that you choose companies that are more appropriate for you,” CEO Alex Karp said in a recorded message.

Despite the reported loss, Goldman Sachs analyst Christopher Merwin upgraded the stock to “Buy” from “Neutral” on the improved visibility. He also significantly hiked the price target from $13.00 per share to $34.00.

“With a growing backlog of $2.8bn in deal value (+31% y/y), we believe there is increasing visibility into the achievability of that long-term target. Also, we believe recent efforts to modularize Foundry and add channel partners like IBM should improve product market fit for the commercial business in the coming quarters.

“We have been impressed by the increased efficiency of the model, as the addition of sales reps has actually lowered CAC by reducing sales cycles through a greater understanding of customer needs. With improving visibility into near- and long-term growth, we believe PLTR should trade more in line with 30%+ growth businesses,” the analyst wrote in a note.

Other analysts were not so sanguine. William Blair analyst Kamil Mielczarek downgraded PLTR from Market Perform to Underperform.

Meanwhile, Credit Suisse analyst Brad Zelnick reiterated an Underperform rating while he raised the price target to $20.00 per share from $17.00.

“Palantir reported a solid 4Q with both revenue and operating profit beating Street. Results were driven by strong growth in the Gov. segment, while Commercial segment rev. Decelerated significantly (~+5% y/y vs. 35% in 3Q). 1Q21 rev. guidance for +45% y/y also came in above Street as did guidance for 23% NGOMs. That said, FY rev. guidance was maintained which leaves lingering questions around the potential magnitude of 2H21 growth deceleration,” Zelnick said in a note to clients.

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