Earnings season might have reached a climax last week with the quarterly readouts of various tech giants, but that doesn’t mean there aren’t any interesting reports left in the pipeline. Today after the closing bell, Palantir (NYSE:PLTR) is set to release its Q4 earnings.
The stakes are high for the big data company since its stock has doubled over the past 12 months. Could the Q4 readout serve as the catalyst for further upside?
That is unlikely, says Citi analyst Tyler Radke. “We are incrementally cautious into Palantir 4Q23 results as we believe an underwhelming federal deal activity Q (even w/NHS contract) should offset strength in U.S. commercial,” the analyst said.
Federal contracts data indicates notable drops in Q4, both sequentially and compared to the same period last year, the declines possibly intensified by “lingering impacts” from the shutdown in 2023. “Though contracts following recent geopolitical conflicts could provide some offsets,” says Radke, “we expect Government business to be relatively in line with consensus.”
Moreover, a look at the details within the large November contract with NHS England reveals that it is “less impressive” than the headlines would have you believe. And while much has been made of AIP (Artificial Intelligence Platform), the platform’s launch last year helping the stock’s case immensely, with monetization still in the early stages, Radke remains skeptical on it being a “meaningful driver of growth in the near-term.”
As such, Radke has lowered his FY24 revenue estimate from the prior $2.599 billion to $2.590 billion, further pulling below consensus at $2.644 billion. While Radke believes that profitability should come in “slightly stronger given recent cost conservatism and lower cost of bootcamp GTM strategy,” that is not enough for the bull case to take shape, given he sees “downside risk” based on the current lofty valuation.
Bottom line, Radke maintained a Sell rating on Palantir shares while his $10 price target suggests the stock is overvalued to the tune of ~42%. (To watch Radke’s track record, click here)
Most of Radke’s colleagues also hold bearish views. 4 other analysts share his perspective, while the addition of 2 Buy ratings and 1 Hold can’t fully offset a Moderate Sell consensus rating. The average target price of $12.20 is higher than Radke’s target but still implies ~29% decline over the next year. (See Palantir stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.