November 1st, 2022 | 10:59 CET
SAP, Kleos Space, Palantir - Tech stocks about to take off
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SAP - Cloud business convinces
Due to the weak euro, Europe's largest software manufacturer is coming through the third quarter better than analysts had forecast. At around EUR 2.1 billion, earnings before interest and taxes adjusted for special effects were on par with the previous year. Sales increased by 15% to EUR 7.84 billion, with two-thirds of the growth coming from currency effects. While software licenses performed weaker than expected, SAP showed a 38% increase in revenue from the cloud, its most important growth area. However, net income slumped 61% to EUR 547 million. Management confirmed its revenue and earnings forecasts for the full year.
Luka Mucic, CFO of SAP, commented: "We had a strong quarter in cloud and saw increasing momentum in all key cloud metrics. We are at an important inflection point in our realignment and expect accelerated revenue growth and double-digit operating profit growth in 2023." The medium-term objectives for 2025, previously published in its quarterly statement for the third quarter of 2020, were also maintained in the press release. SAP expects to achieve double-digit growth in operating profit in 2023. Given the strong growth momentum in SAP's cloud business and the recent positive development in exchange rates, SAP is expected to update its medium-term targets in the coming quarters.
Most analysts reacted positively to the better-than-expected figures. US investment bank Goldman Sachs raised its price target from EUR 111 to EUR 121 after the third-quarter figures and reiterated its "buy" investment rating.
Kleos Space - Ready for take-off
Current uncertainties in geopolitics and expanding global conflicts are likely to continue to put companies like Luxembourg-based Kleos Space in the spotlight. The Data-as-a-Service company launches clusters of satellites, each consisting of four units, into space to scan the Earth for radio frequency signals for geolocation. The Scouting Mission satellites were launched into a 37-degree inclination, collecting data over crucial areas of interest.
The data obtained is then processed using in-house algorithms, packaged and sold to government and commercial analysis and intelligence services on a subscription model. To date, 3 satellite clusters have been launched into space, and the fourth cluster, the Observer Mission (KSF3), is now in the starting blocks. Kleos Space confirmed that the satellites will be launched into Sun Synchronous orbit from Cape Canaveral Space Force Station in Florida on SpaceX's Transporter-6 mission, currently scheduled for Q4 2022. Equipped with AIS, VHF and X-band payloads, the four satellites will expand Kleos Space's data collection capacity by up to 119 million sq km per day. This mission also enables Kleos to increase its average daily revisit rate over a 15-degree latitude area of interest to around five times a day.
The growth company received a prestigious contract from the National Reconnaissance Office (NRO) under the Strategic Commercial Enhancements Broad Agency Announcement. The first-tier contract was awarded based on Kleos' analysis, modeling and simulation of its capabilities to support current and future US government commercial high-frequency reconnaissance needs. Although the Company acknowledged that the financial value of the first-stage contract was immaterial, it believes it has a significant impact on Kleos Space's future potential to serve the US government market.
Despite the Company's progress, the share price has lost about 67% of its value since the beginning of the year. It is trading at a low for the year of AUD 0.25 on a prominent support line that has been successfully defended several times. Should the Observer Mission launch successfully, Kleos Space's share price could also take off.
Palantir - Tension ahead of the figures
After the last quarterly figures, Palantir's share price was characterized by high volatility and heavy losses. It should be exciting on Monday, November 7 before the stock market opens, when the data analysis company, around the headstrong CEO Alex Karp, presents its figures for the third quarter. In the event of a positive surprise, especially in terms of earnings, the scenario could turn around with more substantial price swings in this quarter. The stock has lost about 55% of its value since the beginning of the year but has been able to shine with relative strength in recent weeks. It is close to breaking out of the downtrend at USD 8.95 that has existed since November 2021. A sustained breakout would open up price potential to at least the August high at USD 11.45.
In any case, new orders continue to run like clockwork. Palantir continues to expand its collaboration with the Food and Drug Administration (FDA), helping the agency modernize its food supply chain and resilience as part of the 21 FORWARD initiative. Palantir will serve as the central operating platform for proactive food supply chain disruption monitoring and crisis response. The contract is valued at USD 22 million.
The numbers season produced big disappointments, especially for FAANG stocks, but other technology stocks, such as SAP, surprised on the upside. A positive report for Palantir could see a break from the long-term downtrend. Kleos Space should benefit from the approaching Observer Mission.
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