Why Downgrade PLTR Before Q2 earnings ?
So far, $Palantir Technologies Inc.(PLTR)$ shares have added more than $27 billion in market value this year.
On Tue, 16 Jul 2024, it moved lower following a downgrade from a Wall Street analyst.
This comes about as Palantir inches closer to its Q2 2024 earnings reporting in 3 weeks’ time on 05 Aug 2024.
Co-founded by billionaire investor Peter Thiel in 2003, investors have continued to bet that the data-analysis software provider's foothold in artificial-intelligence (AI) technologies would drive faster earnings growth.
Key to Palantir’s outlook is the group's AIP Logic platform, that enables companies to build specific functions that leverage its large language models (LLMs) without having to use complex computer coding.
Palantir has also been able to leverage its legacy government business, which is tied in part to its work with the Central Intelligence Agency (CIA).
In early May 2024, it also won a new $480 million contract from US Department of Defense (DoD).
Therein Lies The “Issue”.
Mizuho analyst Matthew Broome noted:
Palantir’s market valuation is becoming "increasingly difficult to justify".
This is because Palantir’s stock price is based on “expected future earnings” that are unlikely to happen this year (2024).
Business Invisibility.
While Palantir has performed well overall, in recent quarters, Mizuho Broome remains concerned by the lack of visibility into its business.
As a result, he (a) lowered its rating from “neutral” to “underperform” but (b) raised his price target by a dollar to $22, Strange behaviour, no?
Additionally, Broome is unsure whether Palantir can keep performing well.
Honestly, if it is top secret government projects with CIA or DoD, how much visibility and transparency could there be, when it may concern national security - right ?
Fun Fact:
Based off past earning patterns, Palantir often trades with big swings tied to its near-term sales outlook.
PLTR - 01 May 2024 to 15 Jun 2024
Just this May 2024, the stock saw its biggest one-day decline in 2 years, pegged at -15%, after company officials forecast full-year revenue in the region of $2.68 to $2.69 billion, a tally that came up shy of Wall Street estimates. (see above)
For coming Q2 2024, Palantir estimates revenue around $634 million, with Wall Street now expecting an overall tally of $652.1 million and an adjusted bottom line of $0.08 cents a share.
Market Analysts Consensus
In the latest post by Market Insider, 9 analysts have been polled.
In the 12-month price targets assessment, analysts unveil their insights, presenting: (see above)
An average target of $23.0.
A low estimate of $9.00.
A high estimate of $35.00.
This current average reflects an increase of +12.58% from the previous average price target of $20.43.
Further Drill Down.
Below summary outlines key analysts’ recent evaluations and adjustments to ratings & price targets.
It feels as though Mizuho & RBC Capital analysts were trying to pick bones inside an egg (Chinese idiom). I say let the quarterly earnings speak for itself !
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Do you think Palantir will continue to rise or consolidate in the coming days because of negative market sentiments ?
Do you think Palantir is currently “overvalued” as claimed by market analysts. Yet $NVIDIA Corp(NVDA)$ and $C3.ai, Inc.(AI)$ are not ? These are strange days !
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