Palantir Technologies Inc. (PLTR - Get Rating) develops software platforms for the United States intelligence agencies. Its software services are designed to assist in counterterrorism investigations and operations. The company’s popular software platforms are Palantir Gotham, Apollo, and Palantir Foundry. However, PLTR has an ISS Governance QualityScore of 10, indicating high governance risk.

Shares of PLTR slumped about 55% year-to-date and 34% over the past month. PLTR’s mixed latest quarterly results combined with the bearish market sentiment have caused the stock to plummet over this period. However, the stock has rebounded over the past five days, thanks to new government contracts.

Here’s what could shape PLTR’s performance in the near term:

Mixed Financials

PLTR’s total revenues increased 31% year-over-year to $446 million in the fiscal 2022 first quarter ended March 31. This can be attributed to a 136% rise in US Commercial revenues and a 16% improvement in government revenues.

However, the company’s loss from operations amounted to $39.44 million, while EBT loss came in at $99.36 million. Net loss stood at $101.38 million, translating to a $0.05 loss per share. Operating cash flow declined 69.6% from the prior-year quarter to $35.48 million.

Mixed Growth Story

PLTR’s trailing-12-month revenues have increased 36.7% year-over-year. The company’s trailing-12-month levered free cash flow improved 79% year-over-year, while its trailing-12-month total assets rose 30.9% from the same period last year.

However, PLTR’s trailing-12-month EBITDA declined 73.4% year-over-year. Moreover, its trailing-12-month EPS fell 73.8% from the same period last year.

Premium Valuation

In terms of forward non-GAAP P/E, PLTR is currently trading at 43.88x, 152.8% higher than the industry average of 17.36x. Its forward EV/EBITDA multiple of 20.75 is 82.4% higher than the industry average of 11.38.

Also, PLTR is currently trading 7.55 times its forward sales, 190% higher than the industry average of 2.60. Its forward Price/Cash Flow and Price/Book ratios of 37.24 and 5.57 compare with industry averages of 6.18 and 3.71, respectively. In addition, PLTR forward EV/Sales multiple of 5.77 is 120.3% higher than the industry average of 2.62.

Consensus Rating and Price Target Indicate Potential Upside

Of the 10 Wall Street analysts that rated PLTR, two rated it Buy, while five rated it Hold, and three rated it Sell. The 12-month median price target of $11.28 indicates a 53.7% potential upside from yesterday’s closing price of $7.34. The price targets range from a low of $6.00 to a high of $16.00.

POWR Ratings Reflect Uncertainty

PLTR has an overall rating of C, which translates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

PLTR has a grade of C for Momentum and Quality. The stock is currently trading slightly below its 50-day moving average of $11.75, justifying the Momentum grade. In addition, PLTR’s trailing-12-month gross profit margin of 78.16% is 61% higher than the industry average of 48.55%. However, the company’s negative net income margin and ROE justify the Quality grade.

Of the 26 stocks in the F-rated Software – SAAS industry, PLTR is ranked #16.

Beyond what I’ve stated above, view PLTR Ratings for Sentiment, Stability, Value, and Growth here.

Bottom Line

With an increasing need for cyber security and national intelligence investigations amid rising geopolitical tensions between Russia and the West, PLTR is expected to witness robust revenue growth in the upcoming quarters. However, investors should wait until PLTR’s profit margins improve before investing in the stock.

How Does Palantir Technologies (PLTR) Stack Up Against its Peer?

While PLTR has a C rating in our proprietary rating system, one might want to consider looking at its industry peers, MiX Telematics Ltd. (MIXT - Get Rating), The Sage Group plc (SGPYY - Get Rating), and Descartes Systems Group Inc. (DSGX - Get Rating), which have a B (Buy) rating.

PLTR shares were trading at $8.17 per share on Friday morning, up $0.83 (+11.31%). Year-to-date, PLTR has declined -55.13%, versus a -15.28% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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