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The Case for Palantir By Investing.com

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By Peter Nurse and Yasin Ebrahim

Investing.com — It’s taken some time in coming but Palantir Technologies Inc (NYSE:) has finally gone public, providing investors with an excellent opportunity to benefit from growth at a major player in the key area of data analysis.

As American management consultant Geoffrey Moore said, “without big data, you are blind and deaf and in the middle of a freeway.”

Following years of secrecy, given its ties with customers including spy, law enforcement and military agencies, Palantir’s foray into the public market has forced it to pull back the curtain on its operations and revealed fundamentals that have some scratching their hands.

Investing.com’s Peter Nurse argues the bull case for the newly minted stock, while Yasin Ebrahim explains why it’s a wait-and-see. This is .

The Bull Case

Palantir provides governments and corporations with the tools required to organize and glean insights from mounds of data, helping in areas as varied as detailing the spread of the novel coronavirus to tracking the activities of terrorists.

The U.S. data analytics firm made its debut on New York Stock Exchange debut on Wednesday, after years of speculation, via a direct listing and without the usual razzmatazz surrounding a traditional IPO. 

It’s true the stock is trading below its $10 opening price, but this is still well above its reference price of $7.25 and things are likely to look very different when the Street starts its coverage.

The company has yet to make a profit, but surely that won’t be long in coming given its losses in the first six months of 2020 totaled $164 million, down from $280 million the same period a year prior.

Palantir anticipates 42% revenue growth in 2020 to about $1.06 billion, according to a filing earlier this week, with gross margins for the first half of this year at an impressive 73%. It also forecasts revenue growth of more than 30% next year. 

Palantir was formed in 2003 in the wake of the 9-11 attacks, with its first major backer – the CIA’s venture arm, In-Q-Tel. It was one of the first companies in this space and thus has had a head start in developing the required technology.

While Palantir still analyzes large amounts of data for U.S. government defense and intelligence agencies — contracts which tend to be frequently rolled over — the private sector has become increasingly more important. 

In fact, Palantir now says that a little more than half of its customers come from the private sector instead of governments. And there will undoubtedly be increasing demand from companies given the massive amounts of data they generate.

“Broadly speaking Covid has been a tailwind for our business,” Chief Operating Officer Shyam Sankar said in a recent interview. “We started 83 new engagements with customers in the first three weeks of Covid without getting on a plane.”

The coronavirus pandemic has forced companies to revisit how they do business, and the Covid era doesn’t look like ending anytime soon.

The Bear Case

 

Palantir has never made a profit. Customer concentration is a real risk. Beyond the fundamentals, meanwhile, questions surrounding its approach to data mining and privacy could pose operational headwinds now that it is in the public eye.

 

While unprofitable unicorns – companies valued at more than $1 billion – making their public debut are nothing new, the company is far from a new kid on the tech block having been around since 2003. “They’re massively unprofitable and they’ve never been able to figure it out,” New York University business professor Scott Galloway.

 

It took Google three years to turn a profit, and Amazon seven.

 

Palantir’s answer to questions surrounding its bottom line has been to wean itself off the teat of government clients, who make up nearly half of its revenue, toward commercial clients. Just under half its 2019 revenues were from government agencies, while three clients accounted for more a third of revenues in the first half of the 2020.

 

A single commercial customer made up 14% of revenue in the first half of 2020, while another commercial customer represented 10% of revenue. While just one government customer accounted for 11% of revenue in the first half of 2020, the company reported in its S-1 filing.

 

The concentration of customers will place the Palantir’s ability to scale its commercial business under the spotlight, but its reputation for secrecy and concerns surrounding its approach to data mining and privacy controls, may prove to be operational headwinds, potentially pushing its path to profitability further out for a while a longer.

 

Ahead of the Palantir’s listing, Amnesty International flagged the company’s inability to protect human rights, citing inadequate due diligence into who it is working for.

“We need them [Palantir] to conduct human rights due diligence, and we just don’t have any evidence that they’ve done this,” said Amnesty’s Denise Bell. “We’ve asked for it, and they didn’t supply it.”

 

In the current political climate when tech firms are on trial over alleged privacy and antitrust violations, questionable practices to handling data have already proven to have costly consequences.

 

In the recent past, both Alphabet (NASDAQ:) Inc Class C (NASDAQ:) and Amazon.com Inc (NASDAQ:) have had to cut ties with government agencies after employees threatened to walk out concerns the projects posed potential human rights violation.

 

Palantir employees have already shown they’re of a similar ilk. In 2018, more than 200 employees signed a letter to CEO Alex Karp, citing concerns over a partnership with Immigration and Customs Enforcement, the Washington Post reported.

 

With the shortage of artificial engineers, which represents an important part of Palantir’s revenue from consulting services, the company cannot afford to

run foul of its employees’ expectations.

 





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European stocks fall as healthcare, construction sectors drag By Reuters

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© Reuters. The German share price index DAX graph at the stock exchange in Frankfurt

By Sruthi Shankar

(Reuters) – European shares fell for a third straight session on Wednesday, as losses in healthcare and construction stocks countered a lift from encouraging earnings from consumer giant Nestle and telecoms equipment maker Ericsson (BS:).

The pan-European STOXX 600 () fell 1.0%, in sharp contrast to Asian markets and Wall Street futures that steadied on hopes of a fresh U.S. stimulus package.

Most European sectors slipped, with healthcare stocks () proving the biggest drag, while banking stocks () were supported by rising U.S. and European government bond yields.

Nestle (S:) lifted its 2020 sales forecast following a quarterly beat, but shares inched lower after early gains.

Sweden’s Ericsson (ST:) jumped 5.5% as higher margins and China’s 5G rollout helped the company beat quarterly core earnings estimates.

“Earnings have been generally well above expectations, and guidance has been a positive surprise,” said Patrick Moonen, principal strategist in the multi-asset team at NN (NASDAQ:) Investment Partners.

“But there are other elements that are currently at play and may have a bigger impact on the market performance than earnings.”

Moonen pointed to many European countries reimposing mobility restrictions following a surge in COVID-19 cases that could weigh on fourth-quarter economic activity.

The STOXX 600 has struggled to break out of a trading range since June, when it recouped a large part of the early pandemic-driven losses. The benchmark is still about 16% below its all-time high.

London markets underperformed, with the exporter-heavy FTSE 100 () hit by a surge in pound after bullish Brexit comments. ()

Vivendi (PA:) rose 2.9% after the French media group reported a bigger-than-expected quarterly sales and unveiled plans to list its most-prized asset, Universal Music Group, in 2022.

Third-quarter profits for companies on the STOXX 600 are expected to drop 34.8%, according to Refinitiv data, a slight improvement from the 36.7% predicted at the start of the earnings season.

Of the 29 companies that reported so far, 75.9% have topped earnings expectations.

Gold miner Centamin Plc (L:) slumped 20.7% to the bottom of STOXX 600 after cutting its 2020 production forecast.

Construction companies also took a knocking, with Assa Abloy (ST:), the world’s biggest lockmaker, falling 3.9% after it reported a drop in quarterly sales.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Japan stocks higher at close of trade; Nikkei 225 up 0.31% By Investing.com

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© Reuters. Japan stocks higher at close of trade; Nikkei 225 up 0.31%

Investing.com – Japan stocks were higher after the close on Wednesday, as gains in the , and sectors led shares higher.

At the close in Tokyo, the added 0.31%.

The best performers of the session on the were Takara Holdings Inc. (T:), which rose 7.67% or 83.0 points to trade at 1165.0 at the close. Meanwhile, The Japan Steel Works, Ltd. (T:) added 7.40% or 157.0 points to end at 2280.0 and Pacific Metals Co., Ltd. (T:) was up 5.92% or 95.0 points to 1701.0 in late trade.

The worst performers of the session were NEC Corp. (T:), which fell 2.25% or 130.0 points to trade at 5640.0 at the close. Yahoo Japan Corp. (T:) declined 1.82% or 14.0 points to end at 756.0 and Olympus Corp. (T:) was down 1.79% or 37.0 points to 2027.0.

Rising stocks outnumbered declining ones on the Tokyo Stock Exchange by 2348 to 1140 and 212 ended unchanged.

The , which measures the implied volatility of Nikkei 225 options, was unchanged 0% to 20.83.

Crude oil for December delivery was down 1.08% or 0.45 to $41.25 a barrel. Elsewhere in commodities trading, Brent oil for delivery in December fell 1.14% or 0.49 to hit $42.67 a barrel, while the December Gold Futures contract rose 0.35% or 6.75 to trade at $1922.15 a troy ounce.

USD/JPY was down 0.35% to 105.12, while EUR/JPY fell 0.09% to 124.58.

The US Dollar Index Futures was down 0.26% at 92.812.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Iberdrola’s Avangrid to buy U.S. firm PNM Resources for $4.3 billion By Reuters

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© Reuters. The logo of Spanish utility company Iberdrola is seen outside its headquarters in Madrid

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By Isla Binnie

MADRID (Reuters) – Spanish renewable energy firm Iberdrola (MC:) announced plans to expand in the United States on Wednesday with a deal to buy utility PNM Resources (N:) through its U.S. unit Avangrid (N:) worth $8.3 billion including debt.

Absorbing PNM into Avangrid will create the third-largest renewable energy operator in the United States, with business spanning 24 states, Iberdrola said in a statement.

On Tuesday Reuters reported that the deal was being discussed.

PNM’s board unanimously approved the $4.3 billion offer to its shareholders of $50.3 per share, the filing said. Iberdrola expects the deal to close in 2021 and start boosting financial results from the first year.

Green energy targets and increasing investor interest in protecting the environment have buoyed Iberdrola and other renewables-focused utilities.

The pandemic has also seen U.S. utilities look harder at consolidation to cut costs and spur investment.

Active in New Mexico and Texas, PNM gives Avangrid a route to expand its regulated business beyond the U.S. northeast.

PNM could also benefit from Avangrid’s renewables experience as it works to cut emissions.

Iberdrola said the merged company would have assets worth $40 billion, generate core earnings of around $2.5 billion and net profit of $850 million.

This is Iberdrola’s eighth deal this year as part of a 10 billion euro ($11.85 billion) investment drive in which it has already bought assets in France, Australia and Japan.

CEO Ignacio Galan said his strategy consisted of: “Friendly transactions, focused on regulated businesses and renewable energy, in countries with good credit ratings and legal and regulatory stability, offering opportunities for future growth”.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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