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Palantir stock’s 29% slump represents a buying opportunity, Goldman Sachs says

Palantir stock's 29% slump represents a buying opportunity, Goldman Sachs says

The data analytics company Palantir’s (NYSE: PLTR) stock price saw a big correction in the past five trading sessions. Still, the share price dip has created an attractive buying opportunity in Goldman Sachs’s view, which more than doubled the price target to $34 from the prior $13 target and set a Buy rating.

Goldman Sachs has praised Palantir’s revenue growth trends, seeing strong prospects for achieving revenue targets on the back of growing backlog and collaboration with big names like International Business Machine (NYSE: IBM).  

“We were encouraged to see management guide to $4bn of revenue in FY25, implying a 30% 5-year CAGR from FY20,” Goldman Sachs analysts led by Christopher D. Merwin said. “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.”

Debuted through direct listing in September with a market cap of $16.5 billion and a share price of $10, the data analytics company’s shares rallied more than 200% to an all-time high of $40 at the beginning of this year.

However, the latest selloff has erased 29% of value in the past couple of days due to investors’ concerns over a surprise loss.   

Palantir stock performance. Finviz chart

Its December quarter loss per share came in at $0.08, missing Wall Street consensus expectations for the positive $0.02 earnings per share.

A strong revenue forecast would support gains

The market analysts are optimistic over the long-term picture, with expectations that Palantir is on the verge of generating $4 billion-plus in revenues by 2025.

The company has generated 47% year-over-year revenue growth in fiscal 2020, driven by government and commercial revenue growth.

On top, Denver-based Palantir expects first-quarter revenue to grow 45% from the year-ago period, but revenue growth is forecasted to drop in the second half. For the full 2021, it guides growth greater than 30% from 2020.

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