Earnings season is in full swing, and today’s quarterly report from Palantir (NASDAQ:PLTR) promises to be among the most colorful, as CEO Alex Karp has proven he’s not one to shy away from boisterous statements.
But to be fair, Karp’s not just blowing smoke – he has a strong track record to back up his assertions. Last quarter, Palantir blew past expectations, notching record revenue, robust margins, and a steadily expanding client base.
Still, as every investor knows, yesterday’s wins don’t guarantee tomorrow’s gains. With shares already up 64% this year, the bar is high – and all eyes are on whether Palantir can deliver another blowout quarter or if the momentum starts to cool.
Wall Street is currently projecting $863.8 million in revenue, up 40% year-over-year, and an operating margin of 41.8%, an 8.5-point improvement from a year ago, but a 3.2-point dip from last quarter.
But not everyone’s convinced. RBC analyst Rishi Jaluria warns that even strong numbers might not be enough to support Palantir’s sky-high valuation.
“We cannot rationalize why Palantir is the most expensive name in software. Absent a substantial beat-and-raise quarter elevating the NT growth trajectory, valuation seems unsustainable,” explains the analyst.
Jaluria also points out that some of Palantir’s recent commercial wins were boosted by one-off deals, and the competitive landscape is growing more crowded. Giants like Microsoft aren’t watching from the sidelines, they’re charging into the same space with serious firepower.
Furthermore, the analyst is concerned that Palantir’s business model is not scalable, and its focus on offering heavily tailored approaches will limit potential clientele to large, complex firms.
Even the company’s cornerstone government business isn’t immune to scrutiny. According to RBC’s own government contract tracker, Jaluria expects flat year-over-year growth this quarter.
Bottom line? Jaluria is not buying the hype. The analyst rates PLTR shares an Underperform (i.e. Sell), with a price target of just $40 – a nearly 70% drop from current levels. (To watch Jaluria’s track record, click here)
While not as downbeat as Jaluria, the analyst’s colleagues on Wall Street aren’t exactly brimming with enthusiasm either. With 2 Buy, 8 Hold, and 3 Sell ratings, PLTR carries a consensus Hold (i.e., Neutral) rating. Its 12-month average price target of $89.17 implies a 28% downside. (See PLTR stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.