Palantir (NYSE:PLTR) stock has seen better days. After a blistering debut, shares took the inevitable post-IPO tumble. But they continue to stumble. That is par for the course if you are investing in growth stocks. And the big data and analytics player is a growth stock in every sense of the world.
It has a value proposition few companies share. Top stock picker Luke Lango loves this one and deservedly so. Few companies can deliver growth like PLTR.
Although it’s still a young company, it has racked up an impressive record of government wins. The defense establishment has faith in this one. That’s why they keep awarding and renewing contracts.
Certain members of Congress have taken issue with its methods and some of its contracts, particularly with the Immigration and Customs Enforcement (ICE) agency.
However, Palantir’s track record shows that many government agencies and commercial institutions believe in its tools. And if they are the best company for the job, they will continue to court favor.
Then why is PLTR stock down? A lot of it has to do with external factors. The Federal Reserve plans to reduce its bond purchases and raise interest rates this year, which do not bode well for growth stocks.
Fears about the omicron variant, spreading quickly and highly contagious, are also cooling growth stocks.
At the same time, investors want more action from Palantir on the commercial side. There is also concern that its revenues are based primarily on American shores. However, the argument worth making is that Palantir’s core offering is still very attractive.
At the start of the year, investors are again looking towards safer bets. You cannot fault them for their decision to do so. Goldman Sachs’ latest forecast suggests that the Federal Reserve will be forced to hike interest rates more than expected this year, as the U.S. government looks to battle inflation and a very strong labor market.
Goldman Sachs (NYSE:GS) has upgraded its outlook on the economy, now forecasting that there will be four quarter-point rate hikes in 2022, up from a prior forecast of three hikes.
With interest rates going back up after near-zero levels during most of the pandemic, people will naturally buy bonds since they come with less risk. That is shaving off valuation from some big growth stocks, and Palantir is no exception.
According to the latest figures from Palantir, the company reported a third-quarter loss of $102.1 million or 5 cents per share on revenue totaling $392.1 million, up from $289.4 million in the year-ago period.
In reporting earnings, Palantir upped revenue guidance. It now expects revenue of $418 million in the fourth quarter. The company is forecasting annual revenue of $1.53 billion for the full year, up from the previous estimate of $1.42 billion.
Palantir Chief Executive Alex Karp previously laid out a 30% revenue growth goal. The new estimate calls for 40% growth this year.
Despite these numbers, investors wanted more. What hurt, in particular, was slowing growth in government contracts and not enough traction on the commercial side. The government segment reported just 34% year-on-year growth. The company’s U.S. commercial revenue grew 103% year over year, and its customer count was up 46%.
Palantir Is Spreading Its Wings Internationally
Investors continue to be frustrated by Palantir’s reliance on government spending for growth. However, the split between commercial and defense revenue was less pronounced in this past quarter than previously.
The company has seen some positive momentum in recent months, with growing customer demand and hiring for sales staff. Building out its commercial pipeline is very important for sustainable growth. Also, there is a sentiment brewing that the company needs to establish an international presence.
On both ends, there is progress to report.
Palantir Technologies is looking to expand its business into a new market by partnering with South Korea’s Hyundai Heavy Industries Group. This partnership could give them an edge in international markets by developing big data platforms for commercial clients outside of America.
Meanwhile, Palantir is shifting its entire U.K. data processing out of the United States at a time when privacy regulations are tightening across the world. The shift in data processing operations by Palantir will allow customers from Europe to be less susceptible to possible leaks.
It will also allow the big data analytics company to build on its impressive base of local clients. It already counts the National Health Service (NHS) among its customers.
PLTR Stock Is a Growth Stock Available at a Discount
Growth stocks are not having a great time. And one can understand why that is. However, the growth prospects for this company are astronomical. There are very few companies that have the track record of Palantir. That puts them into a different league.
The only issue with companies such as this one is when to buy, not whether to buy or not. With the sluggish price momentum we have seen in the last few weeks, the ideal time to invest in PLTR stock is now.
On the publication date, Faizan Farooque 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.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. You can check out his analysis on InvestorPlace and TipRanks.