The Ratings Game: Palantir stock slide continues as earnings create ‘diminished confidence’

by | Aug 9, 2022 | Stock Market

Shares of Palantir Technologies Inc. were extending their slide in Tuesday trading as analysts weighed in on the software company’s weaker-than-expected forecast. Palantir
executives acknowledged in a Monday earnings call that they expected the timing of large government contracts to be pushed out, a factor pressuring the company’s outlook for the full year. While some analysts remained patient that the government deals would eventually materialize and yield rewards for the company, at least one downgraded the stock in the wake of Palantir’s latest announcements.

“While we’ve always been more skeptical of Palantir’s commercial opportunity, our thesis was rooted in what we saw as a uniquely strong position in public sector,” wrote Deutsche Bank analyst Brad Zelnick. “Now with the government business further decelerating off of easier compares and with diminished confidence/visibility ahead, we are left with very little to support our thesis.” He cut his rating on the stock to sell from hold, while lowering his price target to $8 from $11. The shares were off more than 5% in Tuesday trading after losing 14% in Monday’s session. CIti Research’s Tyler Radke also took a pessimistic view. “We think results demonstrate the diminishing tailwinds from COVID-related contracts and SPAC investments, combined with the reliance on large lumpy government deals with uncertain deal timing,” he wrote in a note to clients. Though he noted that Palantir’s management team is upbeat about the potential to get back to a 30% compound annual growth rate as it targets $4.5 billion in fiscal 2025 revenue, Radke said that he “[struggles] to see a near-term inflection/improvement in results” given the pushing out of government deal timing, international challenges, and “sluggish” commercial gr …

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