Analysts Think Palantir is a Short in 2021

Palantir went public in September in a direct listing.

Palantir Technologies has turned heads in its early run in the market, after a direct listing on the NYSE in late September at $10 a share and jumping as high as $33.50 before recently settling into the mid-$20s. But there’s one analyst that believes the stock is on its way toward a bumpy road in 2021.

On Wednesday, Citigroup’s Tyler Radke slashed his rating on Palantir ([$PLTR] to Sell from Neutral, while upping his price target to $15 from $10. He predicts that after the yuge increase since its direct listing, the stock is vulnerable heading into 2021 given a coming lockup expiration and likely growth slowdown. Palantir: Peter Thiel’s Next Home Run

“Specifically we see risk around the lapping of Covid-19 related contracts,” which he thinks could become headwinds in the 2021 second half and into 2022 as the economy reopens, he said. “We are also more skeptical on the Palantir bull case in the commercial business, where there is optimism that Palantir’s simplified new products can drive an inflection in customer growth.”

Peter Thiel is a German-American entrepreneur, billionaire venture capitalist, founder of Thiel Capital Management in 1996, co-founder of Paypal with Elon Musk in 1999 and served as the CEO until they sold to eBay in 2002 for $1.5 billion. After he severed ties with Paypal, Peter started Clarium Capital, a global macro hedge fund based in San Fransisco, became the first outside investor in Facebook when he acquired a board seat and 10.2% of the company for $500,000.

Radke forecasts that virus-related contracts were worth about $120 million to the company a year ago, or about 10% of 2020 revenue—and he sees a likely drag on growth into 2022 if those contracts aren’t renewed. He theorized that would be a striking disparity to many other data-analytics and enterprise-software companies that could see growth bounceback coming out of the pandy. Peter Thiel’s New IPO & Its Not Palantir

He continues to explain that the Palantir bull case rests on the company’s ability to grow its relatively small base of 130 customers by selling a more marginalized version of its software, but he’s dubious it’ll work. “Palantir is facing best of breed competition in many of these product areas, and we do not see the company making enough investments across marketing, sales/distribution, or self-service capabilities to make this successful,” he writes.

Palantir is a big data analytics company based in Denver, Colorado, named after the Tolkien artifact; a Lord of the Rings reference, where the magical palantir were “seeing stones” of deception. Thiel is the chairman, alongside Stephen Cohen (New York Mets owner) and has publicly stated the idea for the company was based on the realization that “the approaches Paypal had used to fight fraud could be extended into other contexts, like fighting terrorism.”

Tyler advises investors to keep tabs on the company’s technology demo day on January 26, earnings in mid-February, and the lockup expiration three days after the earnings report. Hitherto, Radke put out a separate note taking a look at the year ahead for cloud-data and analytics-software stocks.

His top picks in the group include MongoDB [$MDB], Elastic [$ESTC], Veeva Systems [$VEEV], and Talned [$TLND]. He advocates staying away from not just Palantir but also MicroStrategy [$MSTR], which has become a proxy for investing in Bitcoin. Radke boosted price targets to $465 from $354 on MongoDB and to $190 from $160 on Elastic. He also elevated his target on Hold-rated Snowflake [$SNOW] to $325 from $300. PayPal & Square Are The New Wall Street Banks

“As Covid-19 headwinds begin to diminish in 2021, and more impacted [or] cyclical sectors begin to recover, we expect there could be increased volatility across software,” he noted. “We believe a playbook that continues to focus on secular growth winners, with a bias towards names that have company specific or clear bounce back catalysts in 2021, makes the most sense. We see clearest signs of secular growth with catalysts ahead at MongoDB and Elastic which are among our top picks. We also see a combination of company specific and secular tailwinds at [Veeva and Talend].”


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