PLTR - The Oracle Deal Isn't a Gamechanger for Palantir Stock. PLTR Is a Buy Anyways.
2024-07-13 10:58:37 ET
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You can tell it’s the dog days of summer by the kind of business news covered by the media. On July 9, Oracle (NASDAQ: ORCL ) announced a tie-up with Palantir Technologies (NYSE: PLTR ) that seemed to move both Oracle and Palantir stock.
“Oracle today announced that Palantir’s Foundry Platform and Artificial Intelligence Platform are certified on Oracle Cloud Infrastructure and generally available across all of Oracle’s distributed cloud deployment options,” the Oracle press release stated .
InvestorPlace’s Samuel O’Brient suggested it was “great news for both companies as the artificial intelligence arms race heats up.”
If there’s one thing writing about stocks for over a decade has taught me, it is that a lot of news is not really news. However, through the proliferation of public relations people, press releases must go out.
Interestingly, Palantir doesn’t appear to have put out their own press release about the tie up. Palantir Executive Vice President Josh Harris is quoted in the Oracle press release but it wasn’t earth-shattering enough for their own.
Is this a game-changer for Palantir stock? Absolutely not. Here’s what it does mean for the data analytics software company.
What Does Oracle Bring to the Table for Palantir?
Oracle has 430,000 customers in 175 countries worldwide. Its cloud services and license support revenue in fiscal 2024 (May year end) was $44.46 billion , accounting for 84% of its annual revenue.
Palantir’s 2023 revenue was $2.23 billion . It finished its fiscal year (December year end) with 497 customers used by over 80 industries worldwide. Approximately 55% of its revenue is from government agencies and 45% from commercial enterprises. Its top 20 customers spent an average of $54.6 million, up from $49.4 million a year earlier.
There is no question that Oracle is the bigger company. Whether its massive list of customers translates into customer wins for Palantir remains to be seen.
However, were it able to convince 100 large Oracle clients to take on Foundry and AIP for business decisions, the revenue pop would be at least $4.5 billion based on average revenue of $4.5 million per customer.
That’s a 200% increase in Palantir’s annual revenue. So, yes, in the most abstract of ways, the Oracle news is good. Execution, which Palantir has proven it has, will need to be very efficient to meet the challenge.
What Does Palantir Bring to the Table?
I don’t think there’s any question that large enterprises and government agencies view Palantir as a valuable resource for running their businesses and organizations.
If Palantir’s platforms can help Oracle’s small and mid-sized business customers advance their AI strategies, the tie-up would be a win/win for all involved.
Palantir was once considered a “special ops” secretive organization working with agencies such as the Central Intelligence Agency and Department of Defense to ferret out the bad guys.
However, its move into more commercial activities, and the launch of AIP last September, has vaulted Palantir into the spotlight. It is no longer operating in the shadows.
By collaborating with Oracle, both companies get what they need. The former gets a partner that legitimizes everything that it’s doing in Big Data, while Oracle gains an AI powerhouse for its existing clients to lean on for help transitioning to an AI world.
When both parties win, it’s an excellent partnership. Time will tell if this is an overly optimistic outcome for the tie-up between the two companies.
The Bottom Line on Palantir Stock
I think the last time I wrote about Palantir was in June when I suggested that investors should buy Palantir stock, and as an aside, it should be in the S&P 500 .
Argus Research analyst had just initiated coverage of PLTR with a Buy rating and a $29 target price. The analyst expects the company to grow its earnings by nearly 20% in each of the next five years.
I think $29 for a 12-month target price at this point is fairly conservative as is the 19% growth rate.
As for the tie-up with Oracle, the proof will be in the pudding. It certainly can’t hurt. Palantir stock remains a must-own in my opinion.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines .
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
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