To buy Palantir at these prices, investors must believe that this growth will both meaningfully accelerate and persist for far longer than previously thought.
The median growth estimate for fiscal 2024 sales is 16%, well below other high-flying peers that are valued at 10-plus EV/NTM sales. But at the same time, investors remain concerned about the impact of a recession on customers’ buying behavior, especially as it pertains to IT spending. Even as investors have returned, valuations have not returned to any semblance of what they were in 2021, even allowing for the bubble conditions of that year that led to tech firms trading at an enterprise value/next twelve months, or EV/NTM, of 40. Macro turbulence continues to be a headwind for stock, leading investors to flee from high-growth tech to other sectors. While there is an uptick in interest in AI (especially following ChatGPT and other GenAI-related product releases), it remains to be seen how this interest translates into companies and governments leveraging Palantir’s tools more. We do think the market’s optimism is overdone. We are waiting for an acceleration in billings, remaining performance obligations, and deferred revenue-the typical forward-looking indicators for tech firms-which will indicate significant client interest in Palantir’s AI offerings. For other investors, and from our perspective, it is a show-me story. CEO Alex Karp had sound bites like: “We will take the entire market” (about AI). If you’re bullish on Palantir and its artificial intelligence opportunity, the earnings provide plenty of reasons to be optimistic. #Shift technologies earning full
To provide some context, Palantir’s most recent quarter was a $20 million beat of expectations, but the firm’s guidance for the full year was revised upward only $5 million. We see this as perhaps a case of pull-forward demand. Earnings were slightly above our estimates, but the outperformance was offset by the fact that the firm’s annual outlook was largely similar to what it had provided previously.Morningstar Uncertainty Rating: Very High.Morningstar Economic Moat Rating: Narrow.Here’s Morningstar’s take on Palantir’s earnings and stock.
Palantir PLTR released its first-quarter earnings report on May 8, 2023.
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