Palantir Technologies Inc. (PLTR) builds software platforms that help organizations integrate their data, decisions, and operations at scale. The company operates through two segments: Commercial and Government. The Commercial segment serves customers working in non-government industries.

The Government segment serves customers in the United States federal government and non-U.S. governments. It has built three principal software platforms: Palantir Gotham, Palantir Foundry, and Palantir Apollo.

PLTR’s revenue increased 25.9% year-over-year to $473.01 million in the second quarter ended June 30, 2022. But it reported a loss per share of $0.01 versus EPS of $0.04 a year ago and the consensus estimate of $0.03. The company has guided revenue between $474 million to $475 million for the current quarter, down from its previous guidance.

For fiscal 2022, PLTR lowered its revenue guidance to $1.90-$1.902 billion. Moreover, the company expects its adjusted operating margin in the third quarter to fall to 11% and decline about 13 percentage points to 18% for fiscal 2022.

PLTR’s stock has declined 53.2% in price year-to-date and 64.7% over the past year to close the last trading session at $8.51. It is currently trading 70.9% below its 52-week high of $29.29, which it hit on September 17, 2021.

Here’s what could the performance of PLTR in the upcoming months:

Disappointing Financials

PLTR’s adjusted income from operations declined 7.6% year-over-year to $107.85 million for the second quarter ended June 30, 2022. Its adjusted EBITDA decreased 7.2% year-over-year to $112.74 million. Also, its adjusted net loss came in at $21.12 million, compared to an adjusted net income of $97.95 million.

Mixed Analyst Estimates

Analysts expect PLTR’s EPS for fiscal 2022 to decline 58.2% year-over-year to $0.05. Its EPS for fiscal 2023 is expected to increase 203.1% year-over-year to $0.16. Its revenue for fiscal 2022 and 2023 is expected to increase 23.2% and 25.2% year-over-year to $1.90 billion and $2.38 billion, respectively. It failed to surpass Street EPS estimates in three of the trailing four quarters.

Stretched Valuation

In terms of forward non-GAAP P/E, PLTR’s 156.81x is 706.2% higher than the 19.45x industry average. Likewise, its 5.85x forward non-GAAP PEG is 281.9% higher than the 1.53x industry average. And the stock’s 7.22x forward P/B is 67.6% higher than the 4.31x industry average.

Lower-than-industry Profitability

PLTR’s trailing-12-month net income margin is negative compared to the 4.25% industry average. Likewise, its trailing-12-month EBITDA margin is negative compared to the 13.07% industry average. Furthermore, the stock’s 0.55% trailing-12-month asset turnover ratio is 14% lower than the industry average of 0.64%.

POWR Ratings Reflect Bleak Prospects

PLTR has an overall D rating, equating to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. PLTR has a D grade for Value, consistent with its stretched valuation.

PLTR is ranked #17 out of 24 stocks in the F-rated Software - SAAS industry. Click here to access PLTR’s ratings for Growth, Momentum, Stability, Sentiment, and Quality.

Bottom Line

PLTR is trading lower than its 50-day and 200-day moving average of $9.50 and $13.17, indicating a downtrend. Despite increased revenues, PLTR’s bottom line declined in the second quarter. Moreover, the company lowered its revenue guidance for the current quarter and the year.

Given its disappointing financials, stretched valuation, and lower-than-industry profitability, we think it could be wise to avoid the stock now.

How Does Palantir Technologies Inc. (PLTR) Stack Up Against Its Peers?

PLTR has an overall POWR Rating of D, equating to a Sell rating. Therefore, one might want to consider investing in other Software - SAAS stocks with a B (Buy) rating, such as MiX Telematics Limited (MIXT) and The Sage Group plc (SGPYY).

PLTR shares were trading at $8.15 per share on Monday afternoon, down $0.36 (-4.23%). Year-to-date, PLTR has declined -55.24%, versus a -12.33% rise in the benchmark S&P 500 index during the same period.

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

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