Palantir Q2 preview: Where next for PLTR stock?

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Josh Warner
By :  ,  Market Analyst

When will Palantir release Q2 earnings?

Palantir is scheduled to release second quarter earnings before US markets open on Monday August 8. The company will hold a webcast on the same day at 0600 MT, or 0800 ET.

 

Palantir Q2 earnings consensus

Wall Street forecasts Palantir will report a 26% year-on-year rise in revenue in the quarter to $472 million, just above the $470 million guidance provided by the company, and expect adjusted EPS to drop by 34% to $0.03.

 

Palantir Q2 earnings preview

Palantir, which supplies software and services to governments and businesses looking to conduct Big Data analysis, has fallen almost 40% since the start of 2022 after being caught up in the tech selloff this year, but the company continues to deliver impressive topline growth, remains in the black and has no debt on its balance sheet.

Sales to governments, which is limited to the US and its allies, is forecast to rise around 15% in the second quarter to $266.6 million. That would be welcomed considering the tough comparatives from the year before, when government sales jumped over 66%.

Its core product sold to governments is its Gotham platform that allows them to analyse counter-terrorism and other forms of attack. The AI-powered system uses vast amounts of real-time data to provide insights to help governments make quick and decisive decisions. The continued growth comes amid a backdrop of rising geopolitical tensions around the world, led by the war in Ukraine that has led to an economic war between the west and Russia and raised the threat of a full-scale war in Europe to its highest level in decades. Palantir said this instability is what is making its software ‘all the more essential’ to governments.

Its unit serving businesses, which is centred on its Foundry system that helps them make informed decisions using Big Data analysis, is slightly smaller but is growing at a rapid pace, with forecasts looking for a 54% rise in revenue to $204.6 million. Sales growth continues to accelerate, suggesting this is where any upside surprises could come from going forward. Palantir has been making a deliberate effort to grow its commercial business after facing criticism for relying too heavily on government contracts, although this is requiring it to invest more in marketing at a time when costs are being pushed up by rampant inflation.

However, analysts have flagged that the outlook for the commercial business should be closely watched considering increased competition and the potential for a pullback on spending by businesses amid the tough macroeconomic environment and uncertain outlook.

Still, Palantir remains confident it can continue delivering impressive growth going forward even in the tough environment.

‘The strength of our business in bearish conditions is due in part to the unrelenting and growing demand for functional and adaptive enterprise software, which has become essential to every large organization that exists,’ Palantir said earlier this year.

Plus, it said it hopes to more than double revenue from the commercial side of the business in the US for a third year in a row in 2022, with hopes of hitting $400 million in sales this year. Analysts currently believe commercial sales in the US and abroad can grow by 41% in 2022.

‘The strength of our commercial business in the United States, where we have seen increasing adoption of Foundry across sectors, is a sign of the strength that we believe we can anticipate globally in the near term,’ said Palantir after the first quarter results were released earlier this year.

Palantir has had success with its strategy of gradually expanding its usefulness to new customers. It aims to acquire new customers by offering services for free or at a low-cost with the view of offering them more vital services once it has proven its value. With this in mind, Wall Street believes Palantir will have added 30 new customers overall in the period to end the second quarter with 307 on its books, up from 277 at the end of March and some 82% higher than one year earlier. Still, the 30 additions will be the weakest rate of growth in one year.

Palantir is targeting an adjusted operating margin of 20% in the second quarter, and markets believe it can beat this goal with a margin of 21.3% pencilled-in by Wall Street. Importantly, Palantir is aiming to grow its margin to average out at 27% over the full year but analysts believe it could fall just short with consensus numbers pointing toward 26.75% in 2022. This would also be down from the 30.7% reported in 2021 as slower topline growth and increased costs bite.

Operating cashflow is expected to come in around $83.0 million in the second quarter, almost four-fold the $23 million reported the year before and up from $35 million in the first quarter. Palantir boasts over $2.3 billion of cash and has zero debt on its books, meaning it has a solid financial foundation to work with.

Palantir is currently aiming to deliver annual revenue growth of over 30% through to 2025. Wall Street believes it could struggle to hit that target in 2022 considering they have pencilled-in just 28% topline growth, suggesting there is some doubt lingering over its guidance.

 

Where next for PLTR stock?

Palantir shares have been steadily finding higher ground since slumping to an all-time low of $6.44 back in May, having set a series of higher lows in recent weeks and months.

The stock is currently at its highest level in over three months and testing $11.20, which emerged as a level of resistance in early April and late May. This is close to the $11.40 average target price set by the 16 brokers that cover the stock, demonstrating they believe the current ceiling could be a tough one to crack. On the other hand, a break above here could be on the cars considering the RSI is firmly in bullish territory, supported by the fact trading volumes have held firm whilst the stock has climbed higher over the past 20 sessions. If it can continue to rise then it can look to return back above the $13 mark before looking to reclaim the April-high that sits largely in-line with the 200-day moving average at over $14.

If the stock comes under renewed pressure, then we could see it slip back toward the 50-day moving and the low of the latest leg at $9. A slip below here opens the door back toward $7.70, which must hold to prevent the all-time low backing into play.

Palantir stock has trended higher since hitting all-time lows

 

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