Palantir Technologies (PLTR) recently experienced a 15% post-earnings selloff, despite reporting upbeat first-quarter results and raising full-year outlook. The stock had previously seen a massive triple-digit rally in the past year, leading to concerns about overvaluation. Analysts were rating PLTR between a Hold and Moderate Sell, dampening investor enthusiasm for Palantir’s AI tools.
The history of PLTR stock has been volatile, with the stock reaching highs of $39 in January 2021, then plummeting to an all-time low of $6 in December 2022. However, PLTR has since made a recovery, but is still below its peak price in 2021. Palantir’s revenues have traditionally been derived from supporting the U.S. government, but the company is now focusing on its fast-growing commercial business to manage and interpret data for enterprises. The demand for Palantir’s AI Platform (AIP) is unprecedented, driving growth in the commercial segment.
In the first quarter of 2024, Palantir reported its sixth consecutive quarter of profitability and raised guidance for the fiscal year. The U.S. commercial segment showed strong momentum, surpassing international commercial revenue for the first time. AIP is driving new customer acquisitions and expanding engagement from existing customers. These positive results led to a reacceleration in Palantir’s U.S. government business as well.
The post-earnings selloff in PLTR stock was triggered by concerns about overvaluation and the perception that growth may not be robust enough to support the high stock price. However, Palantir’s continued profitability and expanding Rule of 40 Score suggest that the company is performing well. While quarterly earnings and revenue beats have historically driven stock performance, any misses can lead to significant downturns in PLTR shares.
Palantir’s profitability trends are gaining momentum, with the company achieving GAAP profitability for the sixth consecutive quarter. The U.S. commercial business is driving growth, with revenue increasing thanks to new customer acquisitions and expansions. Palantir’s AI Platform (AIP) is a key growth driver, attracting unprecedented interest from customers and leading to substantial deal value growth.
Overall, Palantir’s strengths include its position in the AI market, mission-critical solutions for government clients, and sustained profitability. However, risks include macroeconomic headwinds in Europe, competition, and the company’s decision not to engage with China. Palantir’s long-term outlook remains positive, driven by AI tailwinds and growing demand for its solutions. Investors should consider these factors before making investment decisions.
