How Palantir Stock Investors Should Approach Earnings

Over the past few months, whenever I have had an opportunity to discuss Palantir Technologies (NYSE:PLTR), I’ve generally had a pessimistic outlook. So far, this approach has been accurate. On a year-to-date (YTD) basis, PLTR stock is down more than 23%. Across the trailing six months, it’s tanked nearly 44%.

A close-up shot of a hand on a screen with the Palantir (PLTR) logo.

Source: Ascannio / Shutterstock.com

But rarely do publicly traded securities trade consistently higher or lower. Instead, after a series of downturns, it might not be a bad idea to consider the contrarian angle. Whether for fundamental reasons or for purely technical ones, even the most heavily downtrodden equities can always swing higher.

Well, that might be the case for PLTR stock. Despite printing a series of crimson-laden sessions, Palantir is finally showing some signs of life. In the trailing two days, for instance, the equity unit has gained nearly 7%. That’s not going to dent the damage done so far this year, don’t get me wrong. Still, the recovery has to start from somewhere.

If you follow social media, that time could be soon. As InvestorPlace writer William White pointed out, Palantir will release its fourth-quarter earnings report on Thursday morning before the bell. And chatter on various internet forums is talking up PLTR stock.

According to White, “Wall Street is looking for PLTR to post earnings per share of 4 cents on revenue of $413.99 million during the period. Some are expecting the American software company to easily beat these estimates while also posting a strong outlook for 2022.”

If so, I can imagine how such a report would lift Palantir stock shares. Over the trailing year, PLTR stock has wavered between bullish and bearish sentiment. However, the bottom really fell out since early November. In turn, this could be a time for bulls to reassert themselves.

PLTR Stock Not Out of the Woods Yet

In my opinion, the forward guidance that management discloses will be most important for PLTR stock. It wasn’t until close to year’s end that speculation started rising about the Federal Reserve raising interest rates. Therefore, much of the Q4 financials occurred during a more hopeful period.

But since then, consumer inflation has gotten out of control, enough to the point where the Fed almost surely has to take action. As well, brewing geopolitical tensions — particularly in eastern Europe — may greatly affect the economy.

No, tensions there don’t directly relate to PLTR stock as far as I know. However, an armed conflict near the heart of Europe could destabilize energy markets, sending prices even higher. More than likely, such an outcome will have a negative impact on growth-centric names like Palantir.

So, if management provides a positive outlook and credible reasons for its optimism? Yeah, that could swing the needle in favor of PLTR stock.

Nevertheless, I think caution is the smarter approach. I’ve said this before and I’ll say it again: if Palantir executives believed in Palantir the company, they would buy Palantir the stock. Instead, every insider transaction I’ve seen involves row after row of sell orders.

At this point, you might argue that this is merely capitalism in action: executives are merely actualizing the benefits of taking a big risk on Palantir and succeeding. However, they could succeed more if they knew that PLTR stock would rise in value.

Of course, nobody knows how a particular stock would react in the market. But if there was strong confidence that Palantir shares would rise, why are executives — the closest to the business — so eager to head to the exits?

It sounds fishy to me.

Don’t Overthink the Obvious

Would a small number of executives buying PLTR stock make me change my mind about its prospects? It would at least warrant serious consideration for the bullish contrarian position.

But that’s not what’s happening. Instead, none of the executives apparently have an optimistic view of their company. I get it if execs wanted to dump out at $31. But they’ve been dumping down to $14 and who knows? It probably won’t stop there.

Thus, I can’t approach Palantir with anything other than skepticism at this point. If the insiders won’t touch it, why should you?

On the date of publication, Josh Enomoto 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.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


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