Data-mining-software company Palantir Technologies (NYSE:PLTR) stock started trading on the Big Board on Sept. 30 following a direct public offering (DPO). In this direct listing, there were no new shares of Palantir stock offered. Instead, existing shareholders were allowed to sell their stocks to new investors. Source: Sundry Photography / Shutterstock.com The New York Stock Exchange initially set a reference price of $7.25 per share, but on its first trading day, Palantir stock opened at $10 and closed at $9.50. On Nov. 27, Palantir stock saw a record high $33.50 and are now flirting with $25.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Denver-based Palantir was founded in 2003 by a group of executives led by Peter Thiel, founder of PayPal (NASDAQ:PYPL). He was also one of the early backers of Facebook (NASDAQ:FB). Palantir’s initial works, especially with government agencies such as the Central Intelligence Agency (CIA), have been regarded as controversial and even secretive. Grading 10 of 2020's Hottest SPACs in Preparation for the New Year Today’s article looks at what investors can expect from the company. Although PLTR is relatively overvalued, those investors with a long-term horizon can regard any dip toward $22.5 or even below as an opportunity to go long PLTR stock. Here’s why. Government Contracts and Palantir Stock Since 2003, Palantir has expanded the customer base to other governments as private corporations. For instance in November 2019, Palantir and Japan based insurer Sompo (OTCMKTS:SMPNY) formed a joint venture together. Then in June 2020, they launched the “Real Data Platform for Security, Health and Wellbeing.” Recent academic research by Roxana Akhmetova of University of Oxford, claims the “partnership is problematic” because Thiel is a Trump adviser. In September, Palantir was awarded a $44.4 million worth, three-year contract by the U.S. Food and Drug Administration (FDA). It will provide data management and analytics services to the FDA’s Center for Drug Evaluation and Research (CDER), which focuses on potential new medicines. Beginning of December, Palantir announced a cooperation with the government of Greece. The country is working on improving its COVID-19 response efforts by integrating more data and analytics in the decision-making process. Recently, Palantir has developed a tool for the U.S. government for monitoring the manufacturing of coronavirus vaccines as well as their distribution. The UK National Health Service has also been working with Palantir. In the summer, CNBC reported, that Britain’s NHS gave Palantir access to millions of UK residents private personal data. Palantir recently signed a two-year contract with the NHS. It will now provide the organization a software platform for data processing. In fact, a recent company press release highlights, Palantir is “supporting a diverse range of institutions as they respond to the COVID-19 pandemic and adapt for the future.” How Palantir’s Recent Earnings Came In mid-November, Palantir released Q3 results. Revenue was $289.4 million, up 52% YoY. Net loss of $853.3 million translated into diluted net loss per share of 94 cents. As of Sept. 30, the total of cash and equivalents were $1.8 billion. Management raised full-year 2020 revenue guidance to a range of $1.070 billion to $1.072 billion, up 44% YoY. The company emphasized its international expansion in the quarterly statement. Co-founder and CEO Alexander C. Karp cited, “Sompo’s work is vital to Japan’s welfare and security, and Kengo Sakurada, the company’s group chief executive officer, has been a critical and trusted partner as we work with Sompo to expand our reach in Asia.” Palantir stock’s forward P/E, P/S, and P/B ratios are 208.33, 42.58, and 37.0 respectively. PLTR stock is frothy, even for a growth stocks that is able to get an important number of government contracts. Given the metrics, it is currently one of the most expensive software stocks on the Street. For instance, the trailing P/E and P/B ratios for the SPDR S&P Software & Services ETF (NYSEARCA:XSW) are 30.62 and 6.63. The Bottom Line Palantir is a growth stock and is likely to create shareholder value for many years to come. However, it is richly valued and expensive. Therefore long-term investors could consider buying the dips, especially if the price declines toward $22.50. Are you currently a shareholder? You may think of initiating a covered call position in PLTR stock. Then, you could possibly protect some of your paper profits. For example, an ATM covered call that expires on Jan. 15 would decrease portfolio volatility and offer some downside protection. Investors could also consider by an exchange-traded fund (ETF) that also holds Palantir stock in its portfolio. Examples include the Renaissance IPO ETF (NYSEARCA:IPO), the First Trust U.S. Equity Opportunities ETF (NYSEARCA:FPX), the Vanguard Mid-Cap ETF (NYSEARCA:VO), the ARK Next Generation Internet ETF (NYSEARCA:ARKW), or the BNY Mellon US Small Cap Core Equity ETF (NYSEARCA:BKSE). On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation and publishes educational content on investing. More From InvestorPlace Why Everyone Is Investing in 5G All WRONG Top Stock Picker Reveals His Next 1,000% Winner Radical New Battery Could Dismantle Oil Markets The post Palantir Stock Is Going to Give Ground Before It Moves Markedly Higher appeared first on InvestorPlace.
LinkedIn Co-founder Reid Hoffman joins 'Influencers with Andy Serwer' to discuss the future of big tech and the United States' relationship with China under a Biden administration.
While the novel coronavirus pandemic has upended several sectors, some industries are doing better than others. One such sector is tech. SPDR S&P Software & Services ETF (NYSEARCA:XSW) is up by 41.74% compared to the S&P 500, which is up by just 22.73%. One of the major contributors to this enormous success is Cisco (NASDAQ:CSCO) stock. Source: Valeriya Zankovych / Shutterstock.com Many will remember the company from the dot-com bubble burst in the late 1990s. Cisco stock reached some astronomical numbers during that time. And although it hasn’t scaled those heights since, it is one of the most consistent stocks around, up approximately 33% over the last five years. And why not? Cisco has an excellent balance sheet with very little debt. It also boasts excellent operating metrics, juicy dividend yield and is trading at a steep discount to the sector. With so much going for it, it’s hard to argue against Cisco stock right now.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Cisco Stock Is a Bargain Although Cisco stock has recovered a bit from the drubbing it received at the height of the pandemic in March, shares are still trading at a 25.79% discount to the 52-week high of $50.28 per share. You can chalk that up to the global economic slowdown brought about by the pandemic. However, not all is doom and gloom. Several companies are in the race to manufacture a commercial Covid-19 vaccine. So, the slowdown should start letting up soon, and hopefully, pent up demand will make up for any lost sales. 7 Airline Stocks to Buy on Pelosi Stimulus Hopes Cisco is often regarded as an industry bellwether. So, if the company is facing issues, you can bet your bottom dollar that the rest of the sector is also not doing well. And let’s face it. Small and medium-term businesses are suffering, and they serve as the primary customer base for the company. Still, I believe the markets are being exceptionally unkind to Cisco stock. Yes, there will be lower demand for Cisco’s networking and communication products, but even the estimates indicate that the sluggishness will last for a couple of years. And despite the pandemic, even then, revenues are expected to be around $48 billion to approximately $49 billion during this time before the resumption of growth. Source: Chart by Faizan Farooque, data from market estimates Lock on the Future If the pandemic has done one thing, it has exponentially increased the importance of essential IT infrastructure. People are understanding that they need fast, reliable networks to manage their workload. You could argue that Covid-19 is actually a boon for Cisco. Hence, I wouldn’t be too perturbed by the 9% year on year revenue decline during Q4’20. Overall, cash flows and revenues are moving north, while total operating expenses are going down. Another heartening sign is the share count. Cisco was one of the dot com bubble’s original darlings and inked several all-stock deals during its initial heyday. As a result, outstanding share capital ballooned. Hence, shareholders will be happier that the company has used excess cash to fund buybacks. Cisco has spent a massive $42 billion to repurchase shares between 2017 and 2019, leading to a 12% reduction in outstanding shares. Heart in the Right Place Effective management is key to the long term success of any company. It may seem like tech giants like Cisco can go ahead and print money. But success is not a guarantee. And even the best companies can fumble without a reliable, stable guiding light. That’s where Cisco is lucky to have Chuck Robbins as its CEO. After assuming his duties, in 2015, he initiated a strategy focused on shifting the company’s business mix to increase recurring revenues by using software and services. They now represent 50% of Cisco’s revenue, with subscriptions representing 80% of aggregate software revenue. Additionally, Cisco is implementing a $1 billion cost-cutting plan to streamline operations during the pandemic. In announcing these initiatives, the company said it was looking to exit from unprofitable areas and focus its attention on transitioning most of Cisco’s portfolio to high growth areas like cloud security, cloud collaboration,and analytics. My Final Word on Cisco Cisco’s share price does not reflect the underlying fundamentals of the company. Markets are reacting to the lowered guidance Cisco is putting out. And yes, the company is grappling with short term headwinds that will have a bearing on the bottom line for a few quarters. But the long-term growth story is intact. That’s why I believe Cisco stock is fairly valued at the moment. Shares are trading at 15.57 times forward price-to-earnings, while the sector is trading at 32.87 times. As of this writing, the company offers a juicy dividend yield of 3.66%, and it has grown at 13% per annum over the last five years. Overall, analysts seem to agree that this guidance shortfall is a minor issue. The 12-month consensus estimate stands at $47.20 per share, a 20.8% upside to current prices. Long story short, not only is Cisco stock trading at a steep discount to the median, but it also offers a lot of upside by all reports. It’s gotten burned a bit due to its lowered guidance, but that provides you with several more incentives to pick this one up. On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. He has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio. More From InvestorPlace Why Everyone Is Investing in 5G All WRONG Top Stock Picker Reveals His Next 1,000% Winner Radical New Battery Could Dismantle Oil Markets Revolutionary Tech Behind 5G Rollout Is Being Pioneered By This 1 Company The post 3 Reasons Why Cisco Stock Is a Great Investment appeared first on InvestorPlace.