Is This Software Stock A Buy On Its Downtrend?

Is This Software Stock A Buy On Its Downtrend?

Posted On August 5, 2022 1:23 pm

Palantir Technologies Inc. (PLTR) builds and deploys software platforms for the intelligence community in the United States to assist in counterterrorism investigations and operations. The company’s software portfolio includes Palantir Gotham, Palantir Foundry, and Apollo.

On July 28, 2022, PLTR announced that it would expand its work with the U.S. Army Research Laboratory to implement data and artificial intelligence /machine learning capabilities for users across the combatant commands.

In addition, on June 28, 2022, Guidehouse, a global provider of consulting services, announced its partnership with PLTR. However, it might take some time before these ventures can realize substantial gains.

Over the past month, PLTR has gained 20.8% to close the last trading session at $11.20. However, it has lost 38.5% year-to-date and 49.6% over the past year. It is currently trading 73.9% above its 52-week low of $6.44, which it hit on May 12, 2022.

Here is what could shape PLTR’s performance in the near term:

Mixed Financials

For the first quarter ended March 31, 2022, PLTR’s revenue came in at $446.36 million, up 30.8% year-over-year. However, its cash, cash equivalents, and restricted cash came in at $2.33 billion, down 4.7% year-over-year.

Moreover, its adjusted operating margin came in at 26%, compared to 34% in the year-ago period. Also, its adjusted free cash flow came in at $29.79 million, down 80.3% year-over-year. In addition, its adjusted EPS came in at $0.02, down 50% year-over-year.


Stretched Valuations

In terms of its forward EV/S, PLTR’s 10.45x is 253.2% higher than the industry average of 2.96x. Its forward EV/EBITDA of 37.81x is 186% higher than the industry average of 13.22x. Furthermore, its forward P/S of 11.58x is 288.7% higher than the industry average of 2.98x.

Poor Profit Margins

PLTR’s trailing-12-month negative EBITDA margin of 19.46% is significantly lower than the industry average of 12.82%. Furthermore…

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