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This Stock Is A Falling Knife, Not A Buy Opportunity

This Stock Is A Falling Knife, Not A Buy Opportunity

Posted On September 8, 2022 1:48 pm
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Palantir Technologies Inc. (PLTR) builds software platforms that help organizations integrate their data, decisions, and operations at scale. The company operates through two segments: Commercial and Government. The Commercial segment serves customers working in non-government industries.

The Government segment serves customers in the United States federal government and non-U.S. governments. It has built three principal software platforms: Palantir Gotham, Palantir Foundry, and Palantir Apollo.

PLTR’s stock has declined 59.4% in price year-to-date and 72.3% over the past year to close the last trading session at $7.39. It is currently trading 74.7% below its 52-week high of $29.29, which it hit on September 17, 2021.

PLTR beat consensus revenue estimates by 0.3% in the last reported quarter. However, it reported a loss per share of $0.01 versus EPS of $0.04 a year ago and the consensus estimate of $0.03.

PLTR has guided revenue between $474 million and $475 million for the current quarter, below Street’s estimate of $505.60 million. In addition, the company lowered its revenue guidance for fiscal 2022 to $1.90-$1.902 billion, below the consensus estimate of $1.98 billion.

The company expects its adjusted operating margin in the third quarter to fall to 11% and decline about 13 percentage points to 18% in fiscal 2022. PLTR is witnessing a slowdown in its contract wins with the U.S. government, one of its biggest clients. PLTR CFO David Glazer admitted that the weak guidance was due to the “lumpiness” of government contracts.

Here’s what could influence PLTR’s performance in the upcoming months:

Disappointing Financials

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PLTR’s adjusted income from operations declined 7.6% year-over-year to $107.85 million for the second quarter ended June 30, 2022. Its adjusted EBITDA decreased 7.2% year-over-year to $112.74 million. Also, its adjusted net loss came in at $21.12 million, compared to an adjusted net income of $97.95 million a year ago.

Mixed Analyst Estimates

Analysts expect PLTR’s EPS for fiscal 2022 to decline 58.2% year-over-year to $0.05. Its EPS for fiscal 2023 is expected to increase 203.1% year-over-year to $0.16. Its revenues for fiscal 2022 and 2023 are expected to increase 23.2% and 24.5% year-over-year to $1.90 billion and $2.37 billion, respectively. It failed to surpass Street EPS estimates in three of the trailing four quarters.

Stretched Valuation

In terms of forward non-GAAP P/E, PLTR’s 136.17x is 660% higher than the 17.92x industry average. Likewise…

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