Palantir Technologies, a leading data analytics firm, has experienced a notable decline in its stock price, dropping 12% following a series of analyst reports that raised concerns about its international growth prospects. Nonetheless, even during this market rout, the company has been the best story in the market this year. In fact, it was just named as the top performing stock in the S&P 500 for 2024!
Palantir just announced their Q3 financials. The company delivered adjusted net income of 13 cents per diluted share, paired with record revenues of $884 million, a 39% jump over the $634.3 million in the same quarter a year ago. The company’s net income rose by more than 60%. It flew up to around $214 million, or 8 cents per share, an increase from $105.5 million, or 4 cents per share, a year ago.
Statements from CEO Alex Karp indicated amazing confidence in Palantir’s trajectory. He announced, “Palantir is killing it,” and revealed that he is “deeply encouraged” by the new arrangement. The company increased its full-year revenue guidance to a range of $3.89 billion and $3.90 billion. This change is welcome news and suggests a more positive picture for the rest of fiscal year.
Even with these great figures, a number of analysts have recently expressed worry about Palantir’s lofty valuation. As William Blair analyst Louie DiPalma noted, the company is already working off a high multiple. This makes it dangerously “compressible”, particularly if its ability to grow revenue is curtailed. Similarly, Mizuho’s Gregg Moskowitz remarked that justifying Palantir’s elevated software multiple is challenging given the current market conditions.
Raymond James analyst Brian Gesuale expressed support for the move. We recommend Palantir use its valuation cradle to bear the most effective fruits by consolidating most of its realized and unrealized wins. Investors are likely feeling the sting of the firm’s lackluster raise in full-year revenue guidance. They are concerned about the recent trend of declining sequential margins.
RBC Capital Markets analyst Rishi Jaluria highlighted that Palantir’s stock has faced significant volatility amid ongoing market changes influenced by political factors, including President Donald Trump’s tariff plans. He asked if the stock had already priced in this good news, which is expected to carry through into 2025. Given that the current estimates are notably conservative, this is a valid concern.
“Some investors may be disappointed with the modest full-year revenue guidance raise, the sequential margin decline, and the international commercial revenue year-over-year decline.” – Louie DiPalma
Palantir’s international segment has allegedly faced headwinds in Europe, adding to the mixed growth narrative. As the world’s largest private employer, the company has faced and continues to face tenuous challenges. Analysts are divided on whether its strong fundamentals can support its rich valuation in an intensely competitive market.