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Palantir Stock Crafts Lower Lows; Now What?
Stock Analysis & Ideas

Palantir Stock Crafts Lower Lows; Now What?

Palantir Technologies (NYSE:PLTR) stock continues to trend lower and is crafting lower lows. It’s worth noting that Palantir stock lost about 40% of its value in three months. Further, it is down about 20% this year and created a new 52-week low of $14.54.

Palantir is a software company that specializes in Big Data analytics.

What’s Behind this Selloff? 

Palantir’s moderating government revenues are to blame for the selloff in its stock. Also, a consistent decline in its contribution margin further remained a drag. 

For context, Palantir earns revenues from two segments – Government (accounted for 56% of total revenue in Q3) and Commercial (accounted for 45% of total revenue). 

Interestingly, the revenue growth rate at its Government segment has marked a steep deceleration over the past two quarters. Palantir’s revenues from the Government segment rose by 76% in Q1 of 2021. However, it moderated to growth of 66% and 34% in Q2 and Q3, respectively. 

Besides for the slowdown in the Government segment, Palantir’s overall contribution margin has dipped to 57% in Q3 from 62% in Q420. 

Now What?

Owing to the slowdown in its key business segment, investors have maintained a negative outlook on PLTR stock. TipRanks’ Stock Investors tool shows that about 3.5% of investors holding portfolios on TipRanks have sold Palantir shares in the last 30 days. 

Recently, Brent Thill of Jefferies cut the price target on Palantir stock to $24 from $31. The analyst expects the valuation multiple for PLTR to compress further in 2022. However, Thill maintained his buy rating on the stock. 

While Thill acknowledges the slowdown in the Government segment, he remains upbeat about the uptick in the Commercial division. The analyst stated that “on the commercial side, PLTR has been investing in several initiatives to accelerate growth.” 

Wall Street’s Take

The weakness in the government segment and pressure on margins have led most analysts to maintain a bearish outlook on PLTR stock. On TipRanks, Palantir has a Moderate Sell consensus rating based on 1 Buy, 3 Hold, and 4 Sell recommendations.

The average Palantir Technologies price target of $22.14 implies 52.1% upside potential to current levels.

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