Big data and analytics player Palantir Technologies stock (NYSE:PLTR) reported a stronger-than-anticipated set of Q4 2022 results on Friday. Revenue for the quarter came in ahead of estimates at $509 million, marking an increase of about 18% versus the last year. While the government business remained the key driver of growth, with sales rising 23% year-over-year to $293 million, growth has cooled off considerably on the commercial side, with revenue rising by just about 11%, down from a growth rate of 34% in the year-ago period. Palantir also reported its first-ever GAAP net profits of about $31 million, although this was largely due to interest and other income, with the company remaining loss-making at the operating level.

For FY’23, the company has guided revenues of between $2.18 billion and $2.23 billion, marking a growth of about 16% at the midpoint, down from 24% growth in 2022. This is also well below the 30% growth rate over a multi-year period that the company was guiding for in early 2022. The slowdown comes as mounting economic uncertainty has made commercial customers a bit more circumspect about software-related spending although the government business should hold up better. Palantir is also looking to better manage its costs, and go easier on its hiring, while also cutting stock-based compensation to shore up its bottom line. Adjusted earnings from operations are projected at between $481 to $531 million for 2023 (an increase of 20% at the mid-point) and the company also expects to be profitable on a GAAP basis for the full year.

Now Palantir stock rallied by almost 18% in after-hours trading on Monday following the report, trading at close to $9 per share. However, we still think that the risk-to-reward tradeoff for Palantir looks quite compelling at current levels. Artificial intelligence and machine learning are likely to play a greater role in business and the broader economy and this could help Palantir’s business in the long run. Elevated geopolitical tension between the U.S. and China and the Russian invasion of Ukraine are also likely to help the government side of the business. Palantir’s valuation also doesn’t look unreasonable, as the stock trades at just about 7x  projected 2023 revenue, which is roughly in line with the broader software sector despite the company’s above-average growth prospects. We estimate Palantir Valuation at about $13 per share, translating into a potential upside of about 40% from the current market price. Check out our analysis of Palantir Revenue for more details on Palantir’s key revenue streams and business model.

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Returns Feb 2023
MTD [1]
YTD [1]
Total [2]
 PLTR Return -2% 19% -68%
 S&P 500 Return 1% 8% 85%
 Trefis Multi-Strategy Portfolio 0% 11% 250%

[1] Month-to-date and year-to-date as of 2/14/2023
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Source: Nasdaq


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