PLTR Stock: Morgan Stanley Sounds the Alarm on Palantir’s Earnings


  • Palantir (PLTR) posted a Q1 revenue of $525.18 million and an adjusted EPS of 5 cents, beating analyst estimates on both fronts.
  • However, Morgan Stanley believes that “digging into the underlying metrics portrayed a much more mixed picture.”
  • Morgan Stanley noted that Palantir’s revenue beat would have been the smallest since going public when excluding contributions from “Strategic Investments.”
PLTR stock - PLTR Stock: Morgan Stanley Sounds the Alarm on Palantir’s Earnings

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Shares of Palantir (NYSE:PLTR) stock are soaring higher by over 20% after the big data analytics company reported its first-quarter earnings. Revenue tallied in at $525.18 million, up by 18% year-over-year, beating the analyst estimate of $506 million. Meanwhile, adjusted EPS of 5 cents also beat the analyst estimate of 4 cents.

“We were profitable again this quarter… And we now anticipate that we will remain profitable each quarter through the end of the year,” said CEO Alex Karp. “The depth of engagement with and demand for our new Artificial Intelligence Platform (AIP) is without precedent.”

Of the revenue, $236 million was attributed to commercial ventures, up by 15% YOY, while the remaining $289 million was attributed to government opportunities, up by 20% YOY. Meanwhile, GAAP net income was $17 million, marking the second straight quarter of positive GAAP net income.

For guidance, Palantir expects Q2 revenue between $528 and $532 million and positive GAAP net income. For the full year of 2023, the company forecasts revenue between $2.185 and $2.235 billion and positive GAAP net income each quarter.

Still, Morgan Stanley was not entirely impressed with the earnings and reiterated its $8 price target and “equal-weight” rating. Let’s get into the details.

PLTR Stock: Morgan Stanley Sounds the Alarm on Palantir’s Earnings

First, the financial services company points out that Palantir’s “Strategic Investments,” such as its investments in special purpose acquisition companies (SPACs), improved revenue recognition:

“Most significantly, the failure (read bankruptcy) of companies where Palantir made significant investments led to an acceleration in revenue recognition – $33 million in the quarter versus initial guidance of a $15-17 million contribution from ‘Strategic Investments.”

Morgan Stanley added that without the contribution from “Strategic Investments,” Palantir would have reported its smallest revenue beat since its initial public offering. In addition, Palantir’s dollar-based net retention rate (NRR) is also falling. During Q1, the metric was 111%, compared to 115% during Q4 and 124% during Q1 of 2022. On top of that, the net new commercial customer adds during Q1 came to just 20, down by 46% YOY.

Morgan Stanley wasn’t too pleased with Palantir’s guidance either. It added that Q2 revenue guidance implies 12% YOY growth, while growth is expected to accelerate during the second half of the year. This acceleration “may hold risk given the waning internal metrics.”

On the date of publication, Eddie Pan did not hold (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 Publishing Guidelines.

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.

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