In my estimation there’s little reason to believe Palantir (NYSE:PLTR) stock should do anything other than move sideways through July.
I established this position following its Q1 earnings release. I don’t anticipate that it should move before its predicted Q2 earnings release in early to mid-August
I do anticipate that Palantir will be a long-term winner based on its short trading history.
After all, PLTR stock has remained a winner since its IPO last September. The hypothetical investor who established a position on that day would be up right around 142%.
I firmly believe that the software firm will continue to rise on its ability to win U.S. and international government and private sector contracts. Losses remain an issue for the short term.
That said, investors should judge PLTR stock in the short term by losses, not simply its ability to bring money through the door.
A Closer Look at PLTR Stock
It is important that investors note that Palantir anticipates strong top line growth. In Q1 the company recorded $341.23 million in revenues.
That figure represented 49% year-over-year growth. The company also gave guidance that it anticipates $360 million in revenues in Q2, a 43% year-over-year increase.
Further, Palantir anticipates 30% or greater revenue growth through 2025. All of these declarations and strong top line results point to a company and stock headed for long-term price appreciation.
But don’t mistake the forest for the trees. Those top line results are simply trees in a bigger forest. The greater forest – Palantir as an investment – will be a product of how quickly it stems its losses.
Palantir’s $123.47 million Q1 2021 loss was much bigger than its $54.72 million loss in Q1 of 2020.
Palantir will only be too happy to let investors know if and when it records that $360 million of revenue guidance next month, but I’d suggest that when those Q2 figures are released you take a deep dive into its net losses and costs of revenue.
They were all fully laid out in detail in its Q1 earnings report.
If Palantir’s net losses are comparatively worse my guess is that PLTR stock won’t rise in August. After all, PLTR traded flat following Q1 earnings even though revenues increased 49% year-over-year.
My conclusion is that its large $123.47 million loss played a large factor in that occurring.
The market has begun to judge Palantir on its losses more heavily. However, revenues remain vitally important.
So let’s look at what has happened since Q1 earnings were released in May. Toward the end of May the company announced a $32.5 million award to support the United States Space Force and United States Air Force.
It will provide data analytics and further solidifies Palantir’s position in the defense analytics sector.
A few days later, on May 28, Palantir was awarded another contract with the U.S. Special Operations Command. It will continue data operations work for the program and received $52.5 in revenues at award. The total value is $111 million.
Palantir also won a $7.4 million contract from the Centers for Disease Control and an $18.4 million contract with the Federal Aviation Administration.
Palantir is clearly well entrenched in public sector defense analytics as well as Covid-19. In fact, it was awarded an Amazon (NASDAQ:AMZN) Web Services (AWS) global public sector partner award for its help in tackling the public health crisis.
It remains clear that Palantir is an embedded player in public sector analytics. The potential growth is huge and is clearly already underway.
That’s why I remain firm in my belief that PLTR stock will continue to be a winner for years to come.
I’d simply wait until after Q2 earnings are released before establishing a position. Judge whether that makes sense by the losses it posts, not only its top line growth.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.