To The Moon

Palantir Technologies (NYSE:PLTR) shares slipped on Tuesday after investment firm Deutsche Bank downgraded the data analytics software company after it issued second-quarter results, citing concerns about a slowdown in its government business.

Analyst Brad Zelnick moved his rating on Palantir Technologies (PLTR) shares to sell from hold and put an $8 price target on the stock, noting the company does not have much going right at the current moment.

"While we've always been more skeptical of Palantir's commercial opportunity, our thesis was rooted in what we saw as a uniquely strong position in Public Sector," Zelnick wrote in a note to clients. "Now with the Gov't business further decelerating off of easier compares and with diminished confidence/visibility ahead, we are left with very little to support our thesis."

For the period ending June 30, Palantir (PLTR)said it lost an adjusted 1 cent per share, on $473M in revenue, up 26% year-over-year. Analysts were expecting the company to earn 3 cents per share on $471.72M in revenue.

U.S.-based revenue came in at $290M, up 45% year-over-year, while U.S.-based government revenue grew 27% year-over-year. Palantir (PLTR) blamed the slowdown in U.S.-based government revenue on uncertainty from federal spending.

Palantir (PLTR) shares fell nearly 1% to $9.74 in premarket trading.

Zelnick added that with Palantir (PLTR) withdrawing its commitment to generate more than 30% revenue growth until 2025, this adds to the risk profile and there is room for "potential Commercial weakness despite an obviously tenuous backdrop."

Deutsche Bank has always been "skeptical" around Palantir's (PLTR) long-term economics Zelnick wrote, especially with concerns that it is a "true software company" compared to a highly skilled professional services firm with reusable intellectual property. With margins declining and difficulty monetizing the U.S. market, it looks as if Palantir (PLTR) has more questions to face about the viability of its business, the analyst explained.

Lastly, Palantir (PLTR) is trading at 8 times enterprise value-to-revenue, compared to 4 times for its digital services peers and 6 times for companies in the infrastructure software space, making it expensive on a relative basis, Zelnick stated.

Last week, investment firm RBC said its government spending tracker provided "disappointing" results going into Palantir's (PLTR)second-quarter results.

Analysts are mostly cautious on Palantir (PLTR). It had an average rating of BUY from Seeking Alpha authors, while Wall Street analysts rate it a HOLD. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates PLTR a HOLD.