Shares of Palantir Technologies Inc. were extending their slide in Tuesday trading as analysts weighed in on the software company’s weaker-than-expected forecast.
executives acknowledged in a Monday earnings call that they expected the timing of large government contracts to be pushed out, a factor pressuring the company’s outlook for the full year. While some analysts remained patient that the government deals would eventually materialize and yield rewards for the company, at least one downgraded the stock in the wake of Palantir’s latest announcements.
“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,” wrote Deutsche Bank analyst Brad Zelnick. “Now with the government business further decelerating off of easier compares and with diminished confidence/visibility ahead, we are left with very little to support our thesis.”
He cut his rating on the stock to sell from hold, while lowering his price target to $8 from $11.
The shares were off more than 5% in Tuesday trading after losing 14% in Monday’s session.
CIti Research’s Tyler Radke also took a pessimistic view.
“We think results demonstrate the diminishing tailwinds from COVID-related contracts and SPAC investments, combined with the reliance on large lumpy government deals with uncertain deal timing,” he wrote in a note to clients.
Though he noted that Palantir’s management team is upbeat about the potential to get back to a 30% compound annual growth rate as it targets $4.5 billion in fiscal 2025 revenue, Radke said that he “[struggles] to see a near-term inflection/improvement in results” given the pushing out of government deal timing, international challenges, and “sluggish” commercial growth trends when excluding business linked to special-purpose acquisition companies.
He reiterated a sell rating on the stock, while dropping his price target to $6 from $7 in a note titled: “Deals keep on slippin, slippin… into the (far) future.”
Morgan Stanley analyst Keith Weiss chimed wrote that he was keeping his equal-weight rating until “more clarity” emerged.
“The decision to accelerate [investments] during a period of uncertainty weighs on [near-term] profitability and forms the core of the debate going forward – will investments pay off?” Weiss wrote. He cut his price target on the stock to $11 from $13.
Raymond James analyst Brian Gesuale, however, was willing to keep the faith.
“While shares of Palantir rallied off mid-July ~18% before giving most of it back on yesterday’s sloppy print, the underpinning thesis that Palantir could be a $5 billion revenue enterprise and emerge as the government go to ‘software prime’ remains intact while the retrenchment back in the stock price gives some credence that a HSD [high-single-digit] equity price reflects much of the risk in the name,” he wrote.
Gesuale added that his bullish stance “hinges on government revenue re-accelerating with budget growth, more products and customers, and an increasingly dangerous geopolitical backdrop as well as steady state commercial growth ex-SPAC contributions in the mid-to-upper 20s% as the company ramps its sales force, customer base, and products.”
He has a strong buy rating and $20 price target on the stock.
Even with the recent slide, Palantir shares have risen 24% over the past three months as the S&P 500
has gained about 3%.