Palantir Technologies Inc. (PLTR) delivers a suite of software applications for integrating, visualizing, and analyzing information and serves commercial businesses and governments worldwide. The company has built two software platforms: Palantir Gotham and Palantir Foundry. It also offers automotive, financial compliance, legal intelligence, mergers and acquisitions solutions.

Cloudera, Inc. (CLDR) develops a platform for data management, machine learning and advanced analytics. The company offers software subscriptions and public cloud services for its data hub, data warehouse, machine learning, dataflow, and Hortonworks data platform. It serves corporate enterprises and public-sector organizations primarily through its direct sales force.

Click here to check out our Software Industry Report for 2021

Companies have long  sought and analyzed consumer behavior and trends  to improve their product portfolios, businesses and customer satisfaction. The demand for big data and data analytics has evolved quickly in recent years, and especially during the COVID-19 pandemic when almost all sectors adopted digital solutions. Owing to  trends like work from home, IoT devices, e-commerce and cybersecurity threats, software companies doing business in data analytics have been able to benefit and generate significant returns.

Big data companies are trying to leverage innovations in artificial intelligence (AI) to integrate data from various sources, advance data storage and secure platforms to enable organizations to experience high performance computing and deliver insightful analytics. 

The global data analytics market is estimated to hit $24.63 billion in 2021 and grow at a 25% CAGR  over the next nine years. Based on these factors, we think PLTR and CLDR should benefit substantially in the coming months.

While PLTR has retreated 7.1% over the past three months, CLDR has surged 25.9%. In terms of their past six month’s performance, CLDR is a clear winner with 25.9% gains versus PLTR’s negative returns. But, which of these stocks is a better pick now? Let’s find out.

Latest Movements

On June 8, 2021, PLTR was awarded a $7.4 million one-year contract renewal with the U.S. Centers for Disease Control and Prevention (CDC) to continue providing an outbreak response and disease surveillance solution for the Data Collation and Integration for Public Health Event Response Program. PLTR’s foundry-based platform will facilitate the collection and integration of epidemiological, surveillance, and laboratory data and provide tools for multiple organizations to investigate and act. PLTR is looking forward to its continued partnership with CDC.

The United States Special Operations Command (USSOCOM) awarded a $111 million contract to PLTR on May 28 to continue its work as USSOCOM’s enterprise data management and AI-enabled mission command platform. PLTR’s technology enables real-time collaboration across USSOCOM and its allies, bringing AI to the battlefield, and improving the ability to respond to near-peer threats. PLTR is looking forward to developing efficient solutions and continuing this partnership over the long-term.

In an announcement on June 1, 2021, CLDR agreed to acquire two data platform developers—Datacoral and Cazena—in two separate transactions that are  expected to close by the end of its second quarter, 2021. The SaaS platform provided by Datacoral and Cazena will enable CLDR to offer a simplified experience that helps customers use all their data faster and more effectively. The acquisition will support the evolution of CLDR’s public cloud offering and expand its market opportunity as the company moves beyond big data to self-service.

On April 12, CLDR announced that its Cloudera Data Platform (CDP) would  integrate NVIDIA Corporation’s (NVDA) RAPIDS Accelerator for Apache Spark 3.0. GPU-accelerated Apache Spark 3.0 runs seamlessly on CDP, and allows organizations to support HPC, AI, and data science needs with a secure, scalable, and open platform for machine learning. CLDR expects this integration to give enterprises the ability to quickly respond to emerging and ongoing business challenges and deliver insightful analytics.

Recent Financial Results

PLTR’s revenue for the first quarter, ended March 31, 2021, increased 48.8% year-over-year to $341.23 million. The company’s gross profit increased 61.9% year-over-year to $267.12 million. Its adjusted income from operations came in at $116.58 million, compared to a $16.08 million loss in the prior-year period. PLTR’s adjusted net income is reported at $82.65 million for the quarter, compared to a $8.47 million net loss  in the year-ago period. Its adjusted EPS was  $0.04, compared to a $0.01 loss per share  in the prior-year period. As of March 31, 2021, the company had $2.45 billion in cash, cash equivalents and restricted cash.

For its fiscal year 2022 first quarter, ended April 30, 2021, CLDR’s total revenue increased 6.6% year-over-year to $224.28 million. The company’s non-GAAP gross profit came in at $189.18 million, which represents a 13.1% year-over-year improvement. Its non-GAAP income from operations is reported to be $42.52 million, up 145.7% from the prior-year period. While CLDR’s non-GAAP net income increased 137.6% year-over-year to $35.87 million, its non-GAAP EPS increased 140% year-over-year to $0.12. The company had $172.45 million in total cash, cash equivalents and restricted cash as of April 30, 2021.

Past and Expected Financial Performance

PLTR’s revenue grew 48.6% over the past year. Analysts expect PLTR’s revenue to increase 31.2% year-over-year in the next quarter (ending September 30, 2021), 35.5% in 2021 and 29.4% next year. Its EPS is expected to decline 50.2% year-over-year in the next quarter and 21.7% for the current year, but then increase 43.3% next year. The stock’s EPS is expected to grow at a 49.4% rate per annum over the next five years.

In comparison, CLDR’s revenue grew 8.1% over the past year. Analysts expect CLDR’s revenue to increase 5.8% year-over-year in the current quarter (ending July 31, 2021), 6.1% year-over-year in 2021 and 9% next year. However, its EPS is expected to decline 11.6% in the current quarter and 9.1% in the current year but increase 23.3% next year. Analysts expect the stock’s EPS to grow at a 78.4% rate  per annum over the next five years.

Profitability

PLTR’s trailing-12-month revenue is 1.4 times  CLDR’s. However, CLDR is more profitable with a 79.8% gross profit margin versus PLTR’s 69.9%.

Also, CLDR’s 43.3% levered free cash flow margin compares with PLTR’s 24.3%.

Valuation

In terms of non-GAAP forward P/E, PLTR is currently trading at 171.19x, which is 343.2% higher than CLDR’s 38.63x. PLTR’s 30.02x forward EV/Sales is significantly higher than CLDR’s 4.76x.

Also, in terms of forward EV/EBITDA, CLDR’s 16.56x is 609.1% lower than PLTR’s 117.42x.

Thus, CLDR is more affordable here.

POWR Ratings

While PLTR has an overall D grade, which translates to Sell in our proprietary POWR Ratings system, CLDR has an overall B grade, which equates to Buy. The POWR Ratings are calculated considering 118 different factors, each weighted to an optimal degree.

In terms of Quality, CLDR has been graded a B, which is consistent with its higher-than-industry profit margins. CLDR’s 43.3% trailing-12-month levered free cash flow margin is 243.4% higher than the 12.6% industry average. In comparison, PLTR’s Quality grade of C is in sync with its relatively lower levered free cash flow margin. PLTR’s 24.3% trailing-12-month levered free cash flow margin is 92.6% higher than the 12.6% industry average.

CLDR has a B grade for Value, which is consistent with its lower-than-industry valuation ratios. The company’s 3.22x forward Price/Book value is 47.7% lower than the 6.15x  industry average. However, PLTR’s F grade for Value reflects its extreme overvaluation compared to its peers. The company has a 22.63x trailing-12-month Price/Book value, which is 267.9% higher than the 6.15x industry average.

Of 59 stocks in the Software – Business industry, CLDR is ranked #11.

PLTR is ranked #11 of 13 stocks in the Software – SAAS industry.

Beyond what we’ve stated above, our POWR Ratings system has also rated both PLTR and CLDR for Growth, Momentum, Stability and Sentiment.

Get all PLTR ratings here. Also, click here to see the additional POWR Ratings for CLDR.

The Winner

Both PLTR and CLDR are well-positioned to deliver solid returns in the near-term owing to their efforts in improving data analytics and providing secure data platforms for enterprises, amid  rising cyber threats and hacking. However, based on a relatively lower valuation and high profitability, CLDR appears to be a better buy here.

Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to access the top-rated stocks in the Software – Business industry, and here for those in the Software – SAAS industry.

Click here to check out our Software Industry Report for 2021

PLTR shares were trading at $24.70 per share on Tuesday morning, down $0.30 (-1.20%). Year-to-date, PLTR has gained 4.88%, versus a 13.75% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...

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