PLTR Stock: Why Palantir Stock’s Rally Failed But Could Fire Again

Palantir Technologies’ early 2023 rally is over, and now the bulls and bears have to scramble for PLTR stock.


Views from both sides of the investment aisle are largely tied to the view on renewal of major US government contracts. Business in Japan also struggled, falling revenue from investments in special-purpose acquisitions and traction in the healthcare industry.

PLTR stock appeared on the fourth-quarter earnings report. But the bearish view focuses on whether the data analytics software maker can meet the 2023 guidance.

Palantir is one of many AI stocks to watch. Shares are still up 22% this year, recovering from a nearly 65% ​​drop in 2022.

However, PLTR stock has fallen from an intraday high of 10.31 set on Feb. 16. Shares were flat at 7.88 in morning trades above. stock market today.

PLTR Stock: Japanese Enterprise

Deutsche Bank analyst Brad Zelnick is among the bears on PLTR stock.

“We believe the company’s 2023 revenue outlook with +16% growth at the guiding average could prove upbeat and certainly not without risk due to macro factors, drag from SPAC investments (special purpose acquisitions) and possible further delays in funding outstanding U.S. debt. ” Zelnick said in a recent note to clients.

Meanwhile, Bank of America analyst Mariana Perez Mora maintained her buy rating on Palantir stock.

“We think higher stock-based compensation than peers, greater founder voting rights, and less conventional sales and investment strategies balanced by a single position beneficial to the national security and modernization efforts of the US/allied government, a leading role in AI-enabled platforms and opportunistic partnerships,” Mora said in a statement. its note to customers.

For Wall Street analysts, a new factor in Palantir stock valuation considerations has to do with its business in Japan. In November, the company acquired full ownership of a joint venture in Japan to sell Palantir software.

In the fourth quarter, Palantir was profitable using generally accepted accounting principles, or GAAP. A one-time $44 million profit from the acquisition of the Japanese joint venture boosted profits.

Palantir’s SPAC Revenue Drops

In 2023, Palantir will incorporate revenue from the joint venture in its income statement. A report by Morgan Stanley estimates the venture has an annual turnover rate of $50 million by 2023.

Japanese insurance company Sompo Holdings is the largest customer.

But PLTR stock notes that revenue from special-purpose acquisitions will continue to decline through 2023. SPAC raised money in an initial public offering for the purpose of making the buyback.

SPACs that received Palantir’s investment have agreed to multi-year contracts to use the company’s software in their core operations. But many of them are struggling to stay afloat.

Palantir receives nearly 60% of its revenue from government agencies that use Palantir software for intelligence gathering, counterterrorism, and military purposes.

PLTR Stock: Healthcare Highlights

Furthermore, PLTR shares aim to develop its trading business. The software maker is looking to expand into the healthcare, energy, automotive and manufacturing sectors.

Goldman Sachs analyst Gabriela Borges noted in a recent report: “Palantir currently works with four large institutions that account for nearly 10% of the entire US hospital system, including Cleveland Clinic and Tampa General.

In the fourth quarter, commercial revenue grew 11% to $216 million, slowing from 47% growth in the previous quarter. In the first quarter of the year, revenue grew 27% excluding SPACs.

Larger government businesses remain key.

One wild factor is whether Palantir will win more UK contracts from the National Health System. The NHS is already using Palantir during the coronavirus emergency. But a larger contract worth 400 million euros, or $426.6 million, is now up for grabs.

Palantir US Government Extension

Meanwhile, the use of data analysis software Palantir is under scrutiny in Germany because of privacy concerns.

William Blair analyst Louie DiPalma said one problem for PLTR stock is that major US government contracts are about to be extended. He said some US government agencies want more software vendors than just relying on Palantir.

“Palantir has an unusually high number of key government contracts (six) renewals over the next 15 months, including three of its four largest programmes,” said DiPalma.

He added: “In our view, Palantir faces legitimate competition from open source solutions. Some agencies seem to see Palantir’s software as a temporary solution until the system is in place. suitable open source data analysis ready.”

PLTR stock has a Relative Strength Rating of 52 out of the best 99 possible, according to Check IBD Stocks.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity, and cloud computing.


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