On top of the seemingly endless list of headwinds affecting market sentiment in 2022, with Russia’s invasion of Ukraine, the geopolitical landscape became more hazardous.
Monness’ Brian White thinks such chaos “plays into the hands” of $Palantir Technologies Inc.(PLTR)$. The problem for the big data specialist is that with the global economy appearing to be in a “downward spiral,” that won’t be enough to counter the bearish trends.
Next-generation software companies are bound to suffer, says White, given investors’ priorities lies elsewhere right now. The analyst does not expect to see a swift reversal of this trend anytime soon.
Additionally, White thinks the stock’s recent gains (up by 50% since the May lows), could prove “unsustainable” in the present operating environment.
“Although next-gen software vendors have enjoyed a stock price snapback more recently, we believe the market will remain highly selective, focusing on the highest quality companies,” the 5-star analyst expounded on the matter. “As such, we believe many next-gen software vendors will continue to struggle in this environment, especially those that are still trying to gain credibility with investors.”
Heading into Palantir’s 2Q22 results (Aug 8), White expects the company to “at least meet” his 2Q22 revenue forecast of $459.4 million (up 22% year-over-year) and EPS estimate of $0.01. Both, however, are below Street expectations of $470.9 million and $0.03, respectively, and lower than the company’s guide, while White also thinks the quarter’s profits could be “susceptible to the negative impact of non-operating items, including unrealized losses from investments.”
White’s outlook for Q3 also falls short of consensus. The analyst is calling for revenue of $480.1 million and EPS of $0.02, compared to the Street at a respective $507.1 million and $0.05.
The analyst’s forecast factors in a 5% sequential uptick, below past September quarters’ three-year average of a 9% uptick.
Based on all the above, White thinks it’s time to move to the sidelines. That rating is downgraded from Buy to Neutral, while the prior $16 price target is taken off the table.
It’s mostly Holds amongst White’s colleagues too – 6, in total. The addition of 3 Buys and Sells, each, are not enough to move the needle and the stock claims a Hold consensus rating. The forecast calls for 12-month gains of ~26%, considering the average price target clocks in at $11.80. (See Palantir stock forecast on TipRanks)
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