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Palantir Technologies Stock: Why It Drops Another 12.2%

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Palantir Technologies (NYSE:PALANTIR) stocks peaked in January 2021. The company had gone public a few months earlier.

Among other things, it develops software platforms with which secret services can analyze and decrypt data. They are used in the USA and in allied countries abroad. However, Palantir also offers its products to private companies via a second segment, which enables them to analyze data better and faster.

The business is growing very strongly. In the period from 2018 to 2021, sales increased from 595.4 to 1,541.9 million US dollars. Unfortunately, Palantir is still making losses. Between 2018 and 2021 they decreased slightly from -598.1 to -520.4 million US dollars.

Palantir continues to grow

In the second quarter of 2022, revenue increased 26% to $473 million. Palantir beat analyst estimates of $466 million. It grew particularly significantly by 45% to USD 298 million in the USA. However, the company does not provide any information on foreign business.

Revenue from the government business increased 13% to $263 million. The corporate customer segment, on the other hand, is growing much faster. Here, sales improved by 46% to $210 million. The number of customers grew by 80% to 304.

Reasons for the price decline

Earnings could be one reason why the stock continues to fall. It fell from -$138.6 million to -$179.3 million due to investment losses. Palantir trimmed its operating loss from -$146.2m to -$41.7m, roughly in line with estimates. However, adjusted for special effects, operating profit fell by 7.6% to USD 107.8 million.

Investors are mostly disappointed by the outlook. Thus, for the third quarter of 2022, the market was expecting sales of $500 million and operating income of $145 million. However, Palantir Technologies now expects sales of $474-475 million and operating income of $54-55 million.

A third reason for selling is the full-year guidance. Analysts had previously expected sales of $1.96 billion and operating income of $531 million. However, Palantir Technologies is now expecting $1.9 billion to $1.902 billion in revenue and $341 million to $343 million in operating income. Both values ​​miss the previous assumptions, which is the main reason for the price decline.

A final cause is the overvaluation of stocks. For example, Palantir Technologies is trading at a price to sales ratio of 13.45 and a price to book ratio of 9.7 (08/09/2022). While these numbers don’t say much about valuation on their own, they don’t square with current growth rates.

Interesting in the long term

The strong growth in the corporate customer segment and the significantly increased operating cash flow are positive. It grew from 22.8 to 62.4 million US dollars. If Palantir can continue to reduce its costs, the stock could become interesting later on.

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