Large Addressable Market Gives Palantir Plenty of Upside

·4 min read

Data analytics is a hot topic right now and Palantir Technologies (NYSE:PLTR) is leading this trend. After its IPO in September 2020, the stock is now one of the most held investments in the market. This comes as no surprise given the dominant presence of PLTR stock in the tech space and growing support among younger investors.

Palantir Technologies (PLTR) headquarters
Palantir Technologies (PLTR) headquarters

Source: Sundry Photography /

Palantir operates two major data-mining platforms, Gotham and Foundry. It is known for its highly secretive work with the federal government. Helping these high-profile agencies go digital was a major tailwind for the company.

Given the level of secrecy, the company has received criticism for its controversial business model. But, Palantir also has several positive catalysts that make it a great investment.

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PLTR Stock Has Numerous Growth Catalysts

Palantir Technologies, founded by Peter Thiel, provides government agencies with digital solutions required to manage their data and aid with decision making. While the company is not in the business of providing the tools itself, it acts as a processor to help generate insights on existing data. This has gained a lot of traction among public agencies that bring in about 55% of the company’s revenue. The remaining comes from private-sector businesses.

PLTR stock has several catalysts for growth that will keep this company in the limelight for several years.

For one, the firm’s technology caters perfectly to the digital economy. In the era of businesses going virtual, Palantir’s entry into the market could not have come at a better time. The company plays a key role in allowing agencies to process data with artificial intelligence. This is then delivered in the form of a turn-key-software. Helping businesses make the best use of their data this way is a largely untapped market.

A second catalyst is Palantir’s large addressable market. As mentioned earlier, a large proportion of the company’s income comes from government agencies. In Q3, the firm estimates its full-year revenue guidance to $1.07 billion. This is a 44% increase from the previous year. However, as noted by Seeking Alpha, the total addressable market for the company is $119 billion. This means that at a market penetration of less than 1%, Palantir has room to go much higher. Adding to this, the big data market will be worth $229.4 billion by 2025.

High Profile Deals in the Pipeline

A major reason for Palantir’s continued success is the duration of its contracts. The company’s deals with government agencies and commercial businesses can last upward of three years. This enabled Palantir to accelerate its revenue numbers and attract investors. The firm’s high-profile deals in 2020 will sustain its growth over the next couple of years.

On Dec. 23, 2020, PLTR stock gained steam after announcing its deal with the U.K.’s National Health Service (NHS). The deal includes a two-year contract and is said to be valued at $31.5 billion. The NHS will use Palantir’s technology to better understand how the novel coronavirus spreads and its effect on at-risk populations. This will allow the agency to better respond to the resources required at these hot-spots. The deal shows Palantir technology’s growing importance during the pandemic.

In addition to its work with the U.K. health agencies, Palantir signed an agreement with the U.S. Food and Drug Administration, or FDA. The three-year contract is said to be worth $44.4 million. As part of the deal, the FDA will use the firm’s analytical solutions to support the Oncology Center of Excellence (OCE) and the Center for Drug Evaluation and Research (CDER). Palantir’s software will help process vast amounts of data and provide meaningful insights.

These deals provide Palantir stock with a large runway for growth. As the company adds to its current customers, its market share will increase and benefit investors for the long haul.

The Bottom Line

When it comes to investing in PLTR stock, it’s all about playing the long game. After posting some impressive gains in 2020, Palantir remains confident in its ability to generate strong returns. The company predicts its revenue will grow by 30% in the next year. A look at Palantir’s performance this past year supports this prediction.

With a large addressable market, a number of high-profile deals and a unique product, PLTR stock is definitely worth buying in 2021.

On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.

Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.

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