Mizuho Securities analyst Gregg Moskowitz reiterated a Sell rating on Palantir Technologies (PLTR) stock despite the data analytics firm reporting a solid beat-and-raise quarter. Palantir shares are up over 13.5% in pre-market trading at the time of writing, as the company beat both top and bottom-line estimates with a handsome margin. Meanwhile, Moskowitz raised the price target on PLTR to $37 (10.6% downside potential) from $30 to reflect the revised financial estimates.
Moskowitz was impressed by Palantir’s Q3 print but believes that its valuation should not be “irrelevant.” Although the analyst acknowledges that Palantir deserves a premium valuation, he contends that trading at 33x calendar year 2025 revenue estimates cannot be justified.
Key Points Highlighted by Moskowitz
- Numbers Don’t Lie – Palantir’s total revenues exceeded the consensus, including Government revenue of $408 million outpacing the consensus of $375 million. However, Moskowitz highlighted that revenue from the Commercial segment failed to beat the consensus owing to international struggles.
- Management Comments Hint at Volatile Demand – Management stated that robust AI (artificial intelligence) adoption was one of the major catalysts for high revenues. The company is even able to compress its sales cycles and accelerate its land-and-expand process due to the success of its AIP platform. Having said that, the global TCV (total contract value) bookings of $1.1 billion hint at slowing year-over-year demand (33% growth in Q3 versus 47% in Q2 FY24), and the analyst expects this growth to continue to be volatile due to the “lumpy nature” of government contracts and large enterprise deals.
- Meaningful Guidance Raise Across the Board – Following a strong quarterly performance, Palantir raised the guidance across the board for revenue and operating profits for both Q4 and full-year Fiscal 2024. Moskowitz revised his financial estimates for Palantir after the guidance lift.
- Palantir’s Premium Valuation – Based on the company’s revised outlook, Moskowitz raised the price target for Palantir to $37. This now reflects an EV/sales multiple of 32x and 26x based on FY24/FY25 estimates. This also implies a 3x premium multiple to the enterprise software peer group median for FY25, based on Palantir’s leading position, large customers, and potential future growth.
Overall, Moskowitz is concerned about the volatile nature of the government and large enterprise contracts as well as headwinds in the Commercial segment. The analyst is not convinced with the high valuation expectation attached to the shares and hence reiterated a Sell rating on PLTR stock.
More About Moskowitz
Moskowitz ranks #263 of the 9,142 analysts ranked on TipRanks. The five-star analyst boasts an average return per rating of 12.80% and a success rate of 59%.
His best rating to date is a Buy on the cybersecurity firm CrowdStrike Holdings (CRWD), with an impressive 297.10% return between March 20, 2020 and March 20, 2021.
Is Palantir Technologies a Good Stock to Buy?
Analysts prefer to remain on the sidelines on Palantir Technologies. On TipRanks, PLTR stock has a Hold consensus rating based on four Buys, seven Holds, and five Sell ratings. The average Palantir Technologies price target of $29 implies 30% downside potential from current levels. Year-to-date, PLTR shares have zoomed 141.2%.
