Palantir Technologies Inc. (NASDAQ: PLTR) is set to release its fourth-quarter financial results after the market closes this Monday. The company, which has attracted considerable attention in recent years, enters this report with mixed signals from investors.
Over the last year, Palantir's stock price has nearly doubled, illustrating strong momentum in public markets. However, January triggered a reversal in that trajectory, with shares dropping approximately 19%. This downward movement has been influenced in part by investor apprehension regarding the artificial intelligence sector and worries about Palantir's relatively high valuation.
In this environment, analysts at RBC Capital Markets maintain a skeptical stance towards PLTR. Rishi Jaluria, an RBC analyst, recently reiterated a Sell rating for Palantir, assigning a $50 price target. This figure reflects an anticipated decline of nearly 70% from current trading levels. The firm's analysis, as reported by financial data resource TipRanks, emphasizes that the stock appears primed for a correction.
Three primary concerns underlie RBC's bearish outlook:
- Government Contract Slowdown: Internal data from RBC indicates the value of new government contracts secured by Palantir is diminishing. While ongoing global instability could sustain Palantir’s relevance in the long term, immediate government spending trends seem less robust.
- Weakening Commercial Momentum: There are suggestions within the market that enthusiasm for Palantir’s commercial software offerings is waning. The initial surge of adoption by commercial clients appears to be cooling, with some customers exploring less expensive competitors.
- Cash Hoarding Without Shareholder Returns: Palantir holds a substantial cash reserve but has not committed to returning value to shareholders through dividends or stock buybacks. Jaluria notes that retail investors may be growing impatient with this policy.
These factors create a challenging environment for Palantir, particularly given the lofty expectations surrounding its upcoming earnings announcement. Analysts anticipate robust performance benchmarks, necessitating Palantir to deliver significant year-over-year growth to meet or exceed market forecasts.
Specifically, Wall Street analysts expect:
- Earnings per share: Approximately 23 cents, representing an increase of 64% compared to last year.
- Revenue: Around $1.34 billion, denoting a 62% rise over the previous year.
Given these targets, the pressure on Palantir to perform is substantial. RBC highlights that the risk profile favors downside volatility rather than further upward momentum, describing the current situation as "skewed to the downside."
Not all market participants share this cautious outlook. Industry analysts present a range of more optimistic valuations. According to Benzinga Pro, the average price target among several analysts is $195.28.
Recent positive ratings include:
- Phillip Securities: Initiated coverage with a Buy rating and a price target of $208 on January 22.
- Citigroup: Upgraded Palantir to Buy and increased its price target from $210 to $235 on January 12.
- Truist: Launched coverage with a Buy rating and set a price target at $223 on January 6.
As of Monday morning trading, Palantir shares were priced at approximately $150.39, reflecting a 2.59% increase at the time of publication (per Benzinga Pro).
In summary, Palantir stands at a crossroads with significant expectations for growth juxtaposed against critical skepticism regarding its contract pipelines, commercial traction, and cash management strategy. The coming earnings report may therefore serve as a litmus test for the company’s valuation and future market direction.