Analyst Note| Mark Cash |
As its first quarter reporting as a public company, narrow-moat Palantir Technologies' 52% year-over-year revenue growth and adjusted operating margin of 25% were ahead of guidance and our expectations. Showing broad-based demand, revenue grew 35% for the commercial segment and 68% for the government business, compared with the prior year. The firm's transformation into a software vendor from a consulting-led company is evident in the margin improvements, with deployment efficiencies, process automations, and lower travel expenses driving the outperformance. Palantir's stock appreciated about 40% over the last week, and shares mainly stayed flat after reporting. We are maintaining our $13 fair value estimate and believe investors should seek a wider margin of safety.