Palantir plunges 23% on slowing sales growth, weak guidance

Posted: 9 May 2022 2:33 pm
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Sales for the data analytics software company have slowed dramatically, but the company expects the Ukraine war to spur growth. With the price below $10, is it a buy?

Shares of Denver-based software company Palantir Technologies (PLTR) are falling Monday after the company indicated slowing sales growth and reported weaker-than-expected guidance for the second quarter.
The waning sales drove the stock to plunge during premarket trading Monday morning. Losses continued after the opening bell, with the stock falling as much as 23% in the first hours of the trading session.
The data analytics software maker’s earnings seem to reflect an outlook similar to other tech companies this season: the long-term outlook (if correct) is promising, but the short term looks rocky as the economy slows and inflation rises. So far, tech sellers have outnumbered bargain hunters on such news.

What happened?

Revenue for the quarter grew 31% year over year to $446 million but was well short of the 49% growth the company saw in the same quarter last year. Commercial revenue, which had grown 72% in the same period last year, slowed to 54% in the first quarter of 2022. The software maker’s government business, which grew 83% last year, rose “just” 16% this year.
For the current quarter, Palantir said it expects $470 million in revenue. This comes in below the average analyst estimate of $487 million, according to Bloomberg data. The company, known for its work with the US government, said there is a “wide range of potential upside” to its guidance “including those driven by our role in responding to developing geopolitical events.”
“The upside is quite large,” Palantir said during an earnings call with investors. “A lot of this comes down to contract timing and the acceleration of events.”
The indication of slowing sales growth led investors to flee the stock Monday morning, sending shares down as much as 23%. But the company sees a potential reversal driven by the ongoing war in Ukraine.
“It is instability, not its absence, that makes our software all the more essential,” Palantir CEO Alexander Karp wrote in a letter to shareholders Monday.
For all of 2022, it continues to expect an adjusted operating margin of 27%. It also estimates annual revenue growth of 30% or greater through 2025.
The company also missed on earnings for the quarter. Palantir reported a net loss of $101.38 million and adjusted earnings per share of $0.02, compared to the $0.04 per share earnings in the same quarter last year. This fell short of the $0.04 per share earnings Wall Street was expecting.
Palantir’s ​customer count grew 86% year over year.

Thinking of buying Palantir Technologies stock?

Following Monday’s drop, shares of Palantir now trade around 84% off their 2021 all-time high of $45. The stock has also slipped below its September 2020 market debut price of $10.
For a five-year view of the performance of this stock, see the graph in our dedicated guide to Palantir stock.
Despite the year-over-year slowdown in sales, Palantir continues to grow its commercial business in the US. The company said it sees a path to double US commercial revenue for the third year in a row in 2022.
No analysts have yet to change their outlook for the stock, which has an average price target of $15.60. Hitting this target would represent a 111% upside from its current levels. Of the 12 analysts currently covering Palantir stock, four give it a Buy, versus six a Holds and two Sells.

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At the time of publication, Matt Miczulski did not own shares of any equity mentioned in this story.

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