Why Palantir (PLTR) Shares Are Getting Obliterated Today

Petr Huřťák /
2024/06/21 11:19 am EDT

What Happened:

Shares of data-mining and analytics company Palantir (NYSE:PLTR) fell 5.7% in the morning session after Monness, Crespi, Hardt analyst Brian White downgraded the stock's rating from Neutral to Sell and assigned a $20 price target. The price target represents a potential 15% decline from where shares traded when the downgrade was announced. The analyst called out "worries in the software space." adding that earnings results from some of the large enterprise software companies that recently reported were "largely downbeat." In addition, the analyst noted that the anticipated gains from Generative AI had been a "revenue illusion" during the year.

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What is the market telling us:

Palantir's shares are very volatile and over the last year have had 35 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 5 months ago, when the stock gained 28.5% on the news that the company reported fourth-quarter results with expectations for revenue growth to accelerate in the next fiscal year, highlighting growing demand for its new artificial intelligence platform (AIP), which was launched in 2023. 

It was also encouraging to learn that the company has improved the time it takes to deploy AIP and integrate with client's data from "weeks and months to as little as a few hours." The icing on the cake was adjusted operating income well above expectations, showing that the company is not sacrificing profits for the higher topline growth. Also, its revenue, billings, and free cash flow exceeded Wall Street's expectations in the quarter, and its gross margin improved. Notably, the US commercial business significantly contributed to the solid performance during the quarter, as revenue in the segment grew 70% year on year and 12% sequentially. 

Looking ahead, the company expects the US commercial business to grow at least 40% in 2024. A minor negative was that revenue guidance for the next quarter missed analysts' expectations. Overall, this was a very solid quarter for Palantir.

Palantir is up 47% since the beginning of the year, and at $24.36 per share it is trading close to its 52-week high of $26.46 from March 2024. Investors who bought $1,000 worth of Palantir's shares at the IPO in September 2020 would now be looking at an investment worth $2,565.

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