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Palantir Plunges on New Earnings, Disappointing Guidance
Stock Analysis & Ideas

Palantir Plunges on New Earnings, Disappointing Guidance

Big data looked like one of the biggest things to hit business since the invention of the cash register. Thus, it’s a bit of a surprise to hear that a data analytics company like Palantir (PLTR) isn’t doing so well.

The latest quarter hit the company particularly hard. Though it has hope in future developments to bring the company back to normal range, the current picture does not look good.

I’m bearish on Palantir. There may be a path to victory for Palantir, but it looks pretty narrow from here.

The last year for Palantir has had its ups and downs, though the last seven months have been mostly downs. Between November 2021 and today, the company has lost over two-thirds of its value.

The latest news won’t be much help getting that value back, either. Palantir posted a mixed-bag earnings report, where the losses were substantial and the beats minimal.

Palantir posted earnings of $0.02 per share, against projections from Refinitiv that called for $0.04 per share. Revenue was a beat, if only slightly, coming in at $446 million against Refinitiv’s projections of $443 million.

Worse, the company’s own current-quarter projections proved disappointing. Palantir looks to bring in $470 million this quarter, but FactSet analysts looked for $483.7 million.

Wall Street’s Take

Turning to Wall Street, Palantir has a Hold consensus rating. That’s based on two Buys, five Holds, and two Sells assigned in the past three months. The average Palantir price target of $13.81 implies 87.3% upside potential.

Analyst price targets range from a low of $10 per share to a high of $20 per share.

Investor Sentiment is Mostly a Disaster

If you were looking for reason to stay out of Palantir, look no further than investor sentiment. Right now, it’s mostly a disaster, except for one unusual bright spot.

That bright spot will not be found with hedge funds. Hedge funds, based on the latest word from the TipRanks 13-F Tracker, are bailing out with alarming rapidity.

Between September 2021 and December 2021, hedge funds cut involvement from just over 39.8 million shares to just under 37.42 million shares. From December 2021 to March 2022, that changed from 37.42 million shares to just over 3.33 million shares.

Meanwhile, insider trading figures show insiders are abandoning ship almost as quickly. While only two sell transactions have been recorded in the last month, no buy transactions were recorded in that same time. In fact, the last time a buy transaction was recorded from a Palantir insider was back in May 2021.

As for retail investors who hold portfolios on TipRanks, that’s the only real bright spot here. Retail investors likely smell opportunity in the cratering Palantir. In the last 30 days, portfolios with Palantir have increased 10.2%. In the last seven days, meanwhile, that figure is up 6.2%.

The Palantir, Blinded

Palantir derives its name from the Lord of the Rings series, where a “palantir” is a device that allows its user to see events in the past or the future. For a company like Palantir, which uses analytics in a bid to derive insight about the future based on past performance and current data, that’s particularly fitting.

Yet in this case, the Palantir is blinded. The company noted that its sales growth has been slowing down, and worse yet, that its competition is on the rise. Reports note that Palantir is looking to sign on more sales reps in a bid to better take on that growing competition, however.

It’s also looking to ramp up its marketing spend at last report, a good way to potentially bring in new business. However, increased spending of any sort tends to weigh on margins, especially if the marketing spend takes much time to translate into increased sales.

Additionally, Palantir is looking for the Russia-Ukraine war to drive more interest in its offerings. Given the state of the Russia-Ukraine war, however, that may not be around long enough to drive interest in anything.

Thankfully, the company also has its commercial sector business, which is making up some of the slack in declining government sales. Reports noted that revenue was up 31% against this time last year, thanks mostly to the 54% increase in commercial revenue. Government revenue, meanwhile, was only up 16%.

Concluding Views

With 100 shares of Palantir selling for about the same price as a lower-end television, it’s not hard to see where some might want to take a flier in Palantir stock. If Palantir manages to thread the needle, fine; the stock has little place else to go but up. If it goes much lower, the company will collapse completely.

That being said, I’m still bearish on the company. It has a path to victory, certainly. Improvements in the government sales sector will drive the company forward with little trouble.

However, putting any kind of bet on the state of the Russia-Ukraine war seems a bit of a long shot. That war has behaved bizarrely by most any standard, and it’s not the kind of thing I’d want to bet on.

Throw in disastrous investor sentiment overall, and it seems like a better idea to stay out of Palantir than to get in.

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