Live Reactions: Palantir (Nasdaq: PLTR) Sinks 14% After Earnings
Key Points
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Palantir was down about 14% shortly after the market opened today following yesterday’s earnings release.
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Wall Street banks are generally applauding Palantir’s earnings and raising price targets. The problem is that their price targets headed into earnings were dramatically lower than where Palantir traded. That is to say, the company delivered outstanding earnings, but was very richly priced after a recent stock runup.
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While Palantir delivered sales growth significantly above Wall Street expectations and raised its sales targets for the year, there are some concerns about areas like international commercial growth, which sank from last year. That negative growth stands in stark contrast to U.S. commercial growth, which surged 71% from the prior year.
Live Updates
Raymond James Weighs In
Another Wall Street firm is complimenting Palantir’s quarter while keeping the stock at ‘Market Perform’ on valuation concerns. Ramyond James singled out the company’s new free cash flow expectation of $1.7 billion in 2025.
However, while the firm is ‘enthusiastic’ about Palantir’s long-term positioning in AI, it believes shares of Palantir need to continue consolidating.
Morgan Stanley Weighs In
As of 11:00 a.m. ET, Palantir has erased some earlier losses and is now down 12%. The broader market is helping, with the Nasdaq jumping off lows it hit shortly after 10 a.m. this morning.
Another Wall Street bank is weighing in on Palantir’s quarter. Morgan Stanley raised their price target to $98 from a previous target of $90 after Palantir’s earnings report.
The bank cited international commercial as the top ‘fly in the ointment’ of an otherwise strong quarter. The company’s international commercial division sank 5% year-over-year while its U.S. commercial business grew 71%. If Palantir is going to justify its lofty valuation, it will need to get international sales accelerating in the coming quarters and years.
Yesterday, we were updating a live blog covering Palantir’s (Nasdaq: PLTR | PLTR Price Prediction) earnings.
The good news: The earnings were good, with Palantir taking up sales estimates for this year and U.S. commercial revenue growth continuing to accelerate.
The bad news: Palantir had run up significantly heading into yesterday’s earnings and was the priciest software stock in the market. In fact, on a price-to-sales basis, Palantir was 3.5X more expensive than the two closest software stocks (Crowdstrike and Cloudflare).
So, while earnings were excellent, they failed to meet the heightened expectations of the market and Palantir is down a whopping 14% as of 10:10 a.m. ET. We’ll be updating this live blog throughout the day with Wall Street’s reaction to Palantir’s earnings.
Are there fears that there’s more pain ahead or are bulls defending the stock today? Let’s dive into the biggest news.
What Wall Street is Saying
Here’s a rundown of some of the most important Wall Street reactions:
- Goldman Sachs: Maintains a neutral rating and raises its price target to $90. Goldman was impressed with Palantir’s results but cited the stock’s ‘premium valuation’ as a result for the stock’s decline after hours.
- Mizuho: Raised its price target to $94 from a previous target of $80. The researcher cited U.S. commercial and government growth as bright spots.
- DA Davidson: Joined the parade of analysts raising their price targets, with their price target jumping to $115 from $100. David was particularly impressed with Palantir booking U.S. commercial contracts worth $810 million in the quarter. However, the investment bank maintains a neutral rating on Palantir’s shares.
As you can see, most Wall Street banks are raising their price targets on Palantir today. The problem is most their price targets were significantly below where Palantir was traded heading into earnings.
The story is pretty clear: Palantir had a great quarter, but its valuation demanded something extraordinary.
Eric Bleeker has been investing for more than 20 years. He began his career working at Microsoft before joining Motley Fool, one of the largest publishers of financial research. In his 15 years at Motley Fool Eric served as the General Manager for Fool.com and led coverage in the Technology & Telecom sector. In addition, he was a featured columnist and has hosted dozens of investing seminars attended by more than a million total investors. Eric has more than 1,000 financial bylines to his name and has been featured in The Wall Street Journal, CNBC, Fox Business, and many other leading publications. He is currently focused on artificial intelligence investing and is a CFA Charterholoder.
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