Why Palantir Technologies Stock Popped on Friday
Key Points
Palantir won an important legal battle last month, but the details were sealed.
Documents made public yesterday show that the judge barred the company's former employees from using Palantir's proprietary data and poaching its staff.
This victory helps Palantir maintain its competitive advantage.
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Palantir Technologies (NASDAQ: PLTR) stock charged sharply higher on Friday, climbing as much as 5.8%. As of 3:13 p.m. ET, the stock was still up 4.6%.
The catalyst that sent the artificial intelligence (AI) software and data mining specialist higher was a court case that went in the company's favor.
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Order in the court
Palantir has been embroiled in a bitter court battle with several former employees who left the company to join competing AI start-up Percepta. Palantir alleged that Percepta CEO Hirsh Jain, co-founder Radha Jain (not related), and employee Joanna Cohen violated Palantir's confidentiality agreement, stole proprietary data, and engaged in staff poaching.
In a confidential decision handed down last month, U.S. District Court Judge J. Paul Oetken ruled that the three former Palantir employees "likely" violated the terms of their agreement not to use confidential information and to hire away Palantir staff. At the time, the judge sealed the decision to allow Palantir and Percepta to redact sensitive personal and business information.
The verdict was made public late yesterday, showing that the judge ordered Palantir's former employees to cease using the company's data and refrain from poaching its employees, as Palantir would likely suffer "irreparable harm."
The judge also found that Cohen had sent herself company documents, downloaded files onto her phone, and accessed confidential documents outside her purview at the company. These actions prompted a computer alert at Palantir, sparking the legal battle.
Why it matters
Palantir's AI and data analytics systems have experienced unprecedented adoption in recent years, fueling its unbridled success. In the fourth quarter, revenue of $1.4 billion grew 70% year over year, while revenue from its U.S. commercial segment soared 137%. It's easy to see why rivals would be eager to replicate Palantir's success, even going to extraordinary lengths to do so.
This marks an important legal victory for Palantir, helping the company to maintain its competitive advantage.
Palantir's valuation is pricey -- at 115 times forward earnings (as of this writing). That said, given its industry-leading technology, soaring sales and profit growth, and secular tailwinds, I'd argue that the stock is a buy.
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Danny Vena, CPA has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
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