Stocks with sky-high valuations have plummeted this year as investors are seeking safer investments amid persistent macro uncertainty. Shares of Palantir Technologies (NYSE: PLTR) have shed 49% of their value year-to-date. While the firm’s long-term prospects look promising, Wall Street analysts are mixed in their sentiment on the stock.
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Palantir helps government and commercial organizations to effectively integrate their data, decisions, and operations at scale.
The data analytics firm’s first-quarter earnings miss and weak second-quarter guidance also dragged down its stock last month.
Financial Snapshot
Palantir’s Q1’22 revenue increased 31% to $446 million, but adjusted EPS declined 50% to $0.02. Revenue surpassed analysts’ expectations while adjusted EPS fell short of estimates. Also, the company’s Q2’22 outlook of $470 million (base case) lagged Wall Street’s estimates.
Investors also noted a slowdown in Palantir’s Government revenue, which grew 16% to nearly $242 million in Q1’22, compared to the 26% growth rate in Q4’21.
Often criticized for its over-dependence on government contracts, Palantir started focusing on expanding its presence in the commercial markets over the recent times. In Q1’22, overall Commercial revenue grew 54% to about $205 million, with U.S Commercial revenue surging 136%.
Looking ahead, Palantir is optimistic about delivering annual revenue growth of 30% or more through 2025. The company feels that there is a “wide range of potential upside” to deliver revenue above its Q2 outlook, including demand triggered by the ongoing geopolitical events.
Wall Street’s Take
Recently, Goldman Sachs analyst Gabriela Borges initiated coverage of Palantir with a Hold rating and a price target of $10. Borges feels that Palantir is uniquely positioned in an ecosystem of data analytics vendors and she is positive on the company’s longer-term opportunity to succeed in the enterprise.
That said, Borges assigned a Hold rating on the stock citing limited visibility into the cadence of the business in any given quarter, especially in a weaker macro backdrop.
Meanwhile, last week, Bank of America Securities analyst Mariana Perez Mora initiated coverage of Palantir with a Buy rating and a price target of $13. Perez views the company as a beneficiary of “rapidly growing demand” for artificial intelligence platforms in both commercial and government end markets.
Perez further adds that Palantir’s “dominant” position in the AI-powered software market should drive over 30% annual revenue growth and improving profits.
Overall, the Street is sidelined on the stock with a Hold rating based on three Buys, six Holds, and three Sells. The average Palantir price target of $11.32 implies 22.64% upside potential from current levels.
Conclusion
Palantir’s first-quarter results failed to impress investors and Wall Street analysts. Concerns about the slowdown in Government revenue growth and the company’s ability to meet its growth targets amid challenging times are keeping the majority of Wall Street analysts covering Palantir stock on the sidelines.
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