Stock of the week - Palantir Technologies

• Palantir shares dive after steep gains in November

• Company debuted in late-September

• Solid growth in Q3 2020

• Analysts warn about valuation

• Stock reacts to Fibonacci retracements

Palantir Technologies (PLTR.US) is a relatively new company for stock traders as it made its debut in late-September. It has caught market's attention due to its gargantuan rise in share price, gaining almost 170% in November alone! However, stock started to erase gains after some analysts raised concerns over valuation.

Overview

Palantir Technologies is a big data analytics company. It has been on the market since early 2000s and has attracted a lot of orders from government agencies. Rumours saying that it was Palatir's software that helped CIA track down Osama bin Laden as well as ongoing tech boom has made a perfect landscape for IPO in late-September. Share price gained over 200% during its first 2 months of public trading as the company continued to report new customer contracts and boasted about how its software helped companies reduce costs and the pandemic environment.

Solid Q3 growth

Those claims had some backing in Q3 earnings release. Palantir reported 52% year-over-year growth in revenue and said that it has made over a dozen deals worth $5 million each. On top of that, the company said it has struck a 5-year aerospace deal with a total contract value of $300 million. Moreover, Palantir reported that its top twenty customers made up 61% of its revenue in Q1-Q3 2020, a noticeable drop from 68% in Q1-Q3 2019. This shows that the company's revenue stream is getting more diversified, what is always desired. Company still reported Q3 losses, mainly on the back of costs relating to a stock offering. However, adjusting for these one-off costs, operating profit came in at $73.1 million, compared to an operating loss of $92 million in Q3 2019.

Following solid Q3 results, Palantir decided to boost full-year revenue forecast to $1,070-1,072 million, or 44% year-over-year higher.

Analysts warn about high valuation

However, following a massive share price rise, the company is trading at a very high valuation. Well known short-seller Citron Research said on Friday, November 27 that company has a sky-high valuation and is more similar to a casino than stock trading given recent high volatility. Citron has set a price target of $20 per share. Investors started to book profits and the downward move was given more fuel after Morgan Stanley said that current valuation is not supported by fundamentals. Shares closed over 33% below an intraday all-time high yesterday. However, it should be noted that analysts do not question the bright outlook for Palantir's business, they have just grown concerned that the stock price has got itself way ahead of fundamentals.

Share price of Palantir Technologies (PLTR.US) experienced a massive rise since IPO at the end of September. Stock began to drop following analysts' warnings but is reacting to Fibonacci retracements of a 2-month long upward move. In spite of testing 50% retracement twice yesterday ($21.30), it has managed to stay above. Near-term resistance is marked with a 38.2% retracement at $23.40. Source: xStation5