Palantir Just Posted “Escape Velocity” Numbers

Shares of data analytics firm Palantir (NASDAQ:PLTR | PLTR Price Prediction) seemed to buck the trend this earnings season by soaring higher after the release of solid quarterly earnings. But that was then, and this is now, and Palantir stock ended up getting dragged down alongside most other names in the software scene.

Undoubtedly, the sector-wide gravitational pull has wiped out all of the post-earnings gains Palantir shareholders briefly enjoyed and then some. At the time of this writing, Palantir stock is fresh off a brutal plunge of close to 7%, and it’s down more than 3% in the after-hours session. It did not take long for 40% in value to be wiped out. And it has more to do with how fast the expectations “treadmill” is moving than anything else. Palantir didn’t just report strong earnings; it was a blowout.

And one that deserved a rally, not just for a day, but perhaps a sustained one back towards all-time highs just north of the $200 mark. Instead, today’s shares of Palantir are going for $126 per share, and they’re in danger of a 50% fall from peak to trough. Given the negative momentum in tech, the stock might find itself off by half of its all-time high before the month’s end. Either way, it’s worth revisiting the impressive quarter that included what CEO Alex Karp described as “escape velocity” numbers. 

In the meantime, perhaps it’s Dr. Michael Burry of The Big Short fame who’s dancing around as his bearish bets look to finally move deeper into the money.

Palantir’s numbers were extraordinary, but actual results and guidance don’t seem to matter to investors anymore

Palantir made a statement for its fourth quarter, and it seemed like the stock was about to reverse course in a hurry upon the release of the results. In the sessions that followed, the gains were given back, and shares found themselves at new year-to-date depths. For Alex Karp and company, this reaction has got to be a bit of a head scratcher. Revenues crushed expectations, and the U.S. Commercial business exploded higher, with 137% year-over-year growth.

The AI Platform (AIP) bootcamps certainly do seem to be working. And the most absurd thing is that it’s too early in the game to tell if this absurd growth spurt represents a peak. On the U.S. government side, things were firing on all cylinders, with 66% year-over-year growth. In short, Palantir didn’t just edge past expectations; they nailed a grand slam home run. But that didn’t matter, as investors sold the news.

If such an amazing quarter is met with selling (at least in the sessions that followed), it’s hard to tell what, if anything, can move the needle higher anymore.

Palantir is a clear leader of this AI revolution, but it seems like that’s already priced in now. And until the broad AI trade can find its footing amid the panic over CapEx, it’s hard to envision a scenario that sees shares of Palantir bouncing back.

Shares still aren’t cheap yet

Any way you look at it, Michael Burry looks pretty smart right about now. Palantir shares still do not look cheap at 220 times trailing price-to-earnings (P/E), and it’s not clear when they will look cheap enough to justify buying the dip.

Perhaps it’s the negative reaction to an astoundingly positive quarter that makes me most concerned. Palantir might be able to grow into its multiple, but in a climate where software and tech are looking lower, I’m not so sure I want to be jumping in quite yet, at least until the dust has a chance to settle. For investors holding on, it’s a tough call to make. The company has lived up to expectations, but the stock has had other plans.