The company's stock has fallen
Shares of analyst firm Palantir Technologies (NYSE: PLTR) fell about 13.5% this week, according to data provided by S&P Global Market Intelligence, despite the broader markets ending the positive week much higher.
Due to the highly divergent results, the deficit came immediately after the company's earnings report was released on Monday, August 8. The results and forecasts were unimpressive and the negative momentum seemed to outweigh the positive market sentiment.
For the quarter ended 30 June, Palantir reported revenue growth of 26% to $473 million with an adjusted loss per share of $0.01. The revenue figure beat analysts' expectations slightly, but the bottom line was wrong.
As is usually the case with earnings reports, investors reacted more to forecasts than to published figures. That's where the concerns came in: management is forecasting revenue of between $474 million and $475 million for the next quarter versus expectations of $505.6 million. For the year, management has revised the forecast downward to $1.9 billion to $1.902 billion in revenue from the consensus forecast of $1.98 billion.
In a conference call with analysts, CEO Alexander Caedmon Karp noted that the US government is pushing back a number of large contracts, which explains the lower forecasts for the third quarter as well as the rest of the year.
While Palantir produces critical military software for the government, it also produces commercial software for large businesses. This commercial segment grew 46% to $210 million for the quarter, representing 44.4% of total revenue. Businesses appear to be adopting the company's software at an ever-increasing rate, with the number of customers growing from 34 to 119 in the last year alone.
However, while the pace of major government contracts may be uneven, investors may be too pessimistic, given the strength and acceptance of the commercial side of the business. If the commercial business eventually grows and exceeds the size of the government section, Palantir could see an acceleration in revenue growth or maintain a high growth rate for some time.
Palantir has reported positive free cash flow but has negative earnings due to very high share-based compensation, which is a real cost to shareholders. Meanwhile, the shares are still trading at more than 11 times the selling price.