Palantir Stock Hiccups As Downgrade Counters AI-Powered Returns

Palantir (PLTR) stock slid more than 5% Friday, after analyst Brian White at Monness, Crespi, Hardt & Co. downgraded the stock to a sell, setting a 20 price target.

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White cited a meteoric rise in the stock, which is up nearly 300% since the start of 2023, leading to what he described as a “gluttonous” valuation.

While many companies have attempted to brand themselves around artificial intelligence (AI), Palantir is genuinely in the space. Headquartered in Denver, Colo., the company specializes in big-data analytics.

Palantir’s biggest client is the U.S. government, which accounts for about 60% of total revenue. Through its Palantir Gotham, the company aids with counterterrorism investigations, fraud detection and various security operations through data analytics.

Palantir’s second product, Palantir Foundry, is aimed at corporations, enabling them to centralize and harmonize their data, facilitating complex data analysis and decision-making.

Palantir Stock Wins Defense Contracts

Thus far, parties have been quite satisfied with Palantir’s products. On May 29, the U.S. Army extended Palantir’s existing Maven Smart System (MSS) contract for five years, a contract worth around $90 million annually. Additionally, on May 30 Palantir announced it won a Department of Defense Chief Digital and Artificial Intelligence Office (CDAO) contract that could be worth $480 million over five years.

For corporate clients, Palantir has been busy running its Artificial Intelligence Platform (AIP) boot camps to demonstrate the benefits of the company’s software. These boot camps aim not only to help companies solve their current problems but also to explore additional improvements through the use of AI.

On May 20 Palantir announced a $19 million agreement with the Advanced Research Projects Agency for Health to use machine learning to advance health care.

While the boot camps have generally been viewed with success, there are concerns with the company’s lack of disclosure with pricing, which has led to uncertainty over future valuations.

Growth has been steady but, in some cases, unremarkable given the transformative potential AI is expected to bring. Still, total revenue in the first quarter grew 20.8% year over year to $634.3 million, beating estimates by $16 million. Palantir’s profitability was in line with views, at 9 cents per share.

Palantir Stock Sees Growth In U.S. But Europe Lags

While government revenue grew 16% year over year, the major driver has been U.S. corporate revenue, which increased 40% over the same period, with a 69% increase in U.S. customers.

On the other hand, Palantir’s European business has struggled as regulatory concerns around privacy and transparency have stunted growth.

Palantir will report second-quarter earnings in early August. Analysts expect a profit of 8 cents a share, an increase of 61%, on revenue of $653.3 million, up 23%.

Shares are consolidating, trading above both the 50- and 200-day moving averages. A 27.50 buy point is identified by MarketSurge pattern recognition. Earlier in the week, Palantir stock climbed above an early entry around 24 using a trend line.

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