Should financial traders punish Palantir Technologies (NYSE:PLTR) stock because the company’s revenue growth isn’t “good enough”?
That’s the billion-dollar question as PLTR stock stumbled even though Palantir Technologies appears to be on solid financial footing.
Based in Colorado, Palantir Technologies provides security products and services. And of course, Palantir uses artificial intelligence (AI) in its offerings.
This helps to explain why PLTR stock tanked after Palantir Technologies released its second-quarter 2023 results and guidance. The fundamental problem wasn’t that Palantir failed; rather, the market’s expectations have been sky high lately for AI-connected companies.
PLTR Stock’s Rise and Fall
Palantir Technologies’ investors have fared well in 2023 so far. To some extent, this can be attributed to the hype surrounding AI.
Yet, no stock can just go up forever. As Palantir released its quarterly results and outlook, some investors probably sought an excuse to take profits. They found the excuse they were looking for, and PLTR stock quickly dropped from $20 to $15 and change.
Palantir Technologies shares are still up substantially in a year-to-date time frame. Still, it’s important to understand what happened when Palantir reported its quarterly results. There are many positive data points to consider.
First, Palantir Technologies reported its third consecutive quarter of GAAP-measured profitability. Also, Palantir announced Q2 revenue of $533 million, up 13% year over year.
This result was roughly in line with Wall Street’s estimate and higher than Palantir’s previously forecast range of $528 million to $532 million.
Palantir’s Outlook Doesn’t Impress the Critics
Turing to Palantir Technologies’ bottom-line results, the company posted earnings of 5 cents per share. Like the revenue result, Palantir’s per-share earnings were in-line with what Wall Street had expected.
Additionally, Palantir Technologies disclosed a share repurchase program of up to $1 billion. For the next quarterly report, Palantir expects to have generated sales of $553 million to $557 million. That’s encouraging, since the analysts’ consensus revenue estimate was $553 million.
Analysts with Citigroup, on the other hand, declared that they “are just not impressed.” They cited Palantir Technologies’ “low-teens” revenue growth rates and stronger AI tailwinds for the company’s peers.
Naturally, Palantir Technologies will have to deal with fierce competition from its peers in the AI space. As far as the “low-teens” sales growth is concerned, that’s not a terrible revenue acceleration rate.
Truly, the expectations surrounding AI-associated companies has reached a fever pitch. Is that really Palantir Technologies’ fault?
You Don’t Have to Abandon PLTR Stock
Palantir Technologies made a strong impression in this year’s first half, and the share price reflects this. However, now there’s apparently some profit taking happening.
Moreover, the market has set a high bar that Palantir Technologies will have a tough time clearing. Still, PLTR stock earns a solid “B” grade, and investors are invited to decide for themselves whether the company’s financial results justified the recent share-price selloff.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
