Palantir needs to prove it can sustain its growth
Palantir Technologies is a multinational software and services company specializing in data analysis, machine learning and predictive analytics. Palantir’s products are used by government organizations, financial services firms and laboratories worldwide.
On November 4th, 2020 Palantir reported their third quarter earnings report which missed estimates slightly but showed strong revenue growth on year-over-year basis. Palantir’s revenue was up 31%, however its net losses increased to $164 million. Following the announcement, Palantir’s shares dropped more than 10%.
Analysts expressed disappointment with the earnings miss, but noted that it was only a slight one compared to what had been expected. Analysts believe that despite the minor earnings miss, Palantir still has potential for future growth as long as it continues to make strides in proving how its technology can benefit clients on both short-term and long-term basis. With an increasingly competitive software industry saturated by giants like Microsoft and Google, analysts are expecting that Palantir will have to continue to prove itself to sustain its recent growth.
On Wednesday, Palantir Technologies Inc, a data software provider, reported its fourth-quarter figures, showing a slight miss on earnings estimates from Wall Street. The stock closed down more than 10% as investors reacted to the earnings results.
Palantir must prove it can sustain its growth, contributing to a sharp rise in its stock price. Let’s look at the details behind the numbers and analyze the earnings report.
Q1 2021 Earnings
In its first-quarter results, technology firm Palantir Technologies Inc. (PLTR) reported earnings per share of 22 cents, slightly below the Street’s estimates of 24 cents. Revenue came in at $341 million, beating analyst expectations for $334 million. However, shares of the company decreased 8.70% after it reported weaker-than-expected revenues for Q1 2021 and a lack of clarity on the outlook for the rest of the year.
Quarterly, total revenue rose 33% from Q1 2020 to Q1 2021 and 16% from Q4 2020 to Q1 2021, suggesting that despite some growth in revenue during this quarter, Palantir needs to prove it can sustain its growth rates more into 2021 to remain competitive against other tech giants like Microsoft (MSFT) and Amazon (AMZN).
Palantir’s subscription software revenue was up 39% year over year and 17% quarter over quarter, while services revenue rose 18% every year and 5% every quarter. Additionally, operating expenses were up 20%, an increase from 15% in 2019 but still well below historical highs of 35%. Despite these positive signs of efficiency at Palantir and slightly better than expected revenues for this quarter, investors remain unconvinced that Palantir can effectively compete against leaders in enterprise software such as Microsoft or Amazon who have somewhat larger resources available to them.
Revenue Misses Estimates
Palantir Technologies Inc. saw its shares fall on Thursday in after-hours trading after the data analytics company reported its first-quarter earnings.
The company’s revenue exceeded estimates of $310 million, with total revenue at $296 million compared with Wall Street estimates of $310 million. It was an increase of 79% year-over-year, suggesting that Palantir’s growth continues to outpace consensus expectations.
For this quarter, subscription revenues comprised 97% of total revenues and grew by 84% year over year to $288 million, significantly above most analysts’ estimates. Meanwhile, license revenues were just 3%of total revenues and decreased 64% year-over-year from $19 million from the same period a year ago to just $6 million.
It was not a strong showing for Palantir stock as quarterly losses widened more than expected amid slower growth in the technology sector and signs that product spending is taking longer to rebound from pandemic disruptions earlier this year.
In the coming quarters, Palantir needs to prove it can sustain its tremendous growth by making improvements in product delivery standards and investing heavily in sales and marketing initiatives for investors to remain bullish about the company’s prospects down the road.
Missed Earnings Guidance
Palantir Technologies, Inc (NYSE: PLTR) reported its financial results for the second quarter of 2020. The company released its earnings report after market close on August 5th. Palantir fell 5% in after-hours trading after reporting second-quarter adjusted earnings per share of 2 cents, a penny short of the Wall Street consensus.
Revenues for the quarter came in at $289 million, up 21% year-over-year and a penny short of analysts’ expectations. The company reported 20% year-over-year growth in billings for the second quarter totaling $311 million, which was in line with estimates.
Palantir earned its first profit since it went public earlier this year thanks to cost containment efforts and strong software subscription revenues. Despite topping expectations in software subscription revenue growth, it wasn’t enough to offset a miss from service revenue growth and Total Revenue Guidance.
While Investors should be pleased that Palantir’s profitability has taken a turn for the better, there is still a need for Palantir to prove that it can sustain its growth going forward if they wish to have sustained success on Wall Street which remains uncertain.
Stock Price Reaction
Palantir stock had been rising recently as investors speculated on its ability to sustain its growth. However, as the company reported slight earnings miss in its latest earnings report, this led to a wave of selling pressure as investors reacted to the news.
As a result, the company’s stock price has decreased significantly in the past day and investors are anxious to see if Palantir can prove that it can keep the growth and regain their confidence.
Stock Price Drops
Shares of Palantir Technologies Inc. fell in after-hours trading on Thursday after the big data analytics company reported first-quarter earnings and revenue that missed analyst estimates.
The company, which specializes in using large amounts of data to create software for businesses and government agencies, posted adjusted earnings of $62 million on revenue of $341 million, missing the consensus estimates of $118 million on revenue of 375.1 million.
The stock immediately dropped 8% to about $15 in extended trading hours despite an adjusted profit for the quarter that was roughly double what analysts had predicted. Despite strong results from its government and commercial segments, it failed to meet analyst expectations for growth.
Analysts had hoped that Palantir would post even stronger revenue growth this quarter as a sign the company was successfully making the transition to sustainably profitable growth rather than one-time wins driven by demand related to COVID-19 pandemic disruptions. Investors were likely disappointed with the slight earnings miss and have moved on from their optimistic outlook given their negative response in after-hours trading. While attractive contracts with higher payments may be available for now, these are not enough for long term success, so Palantir needs to prove it can continue its strong sales performance into future periods as well if it intends to drive long term growth in its stock price.
Following the release of Palantir’s earnings, analysts have weighed in on the company’s financial performance. Most reported a slight miss against expectations and raised questions on whether the company can continue its recent growth trend.
Analysts generally concurred that although Palantir has achieved impressive growth in 2020, it remains to be seen whether the firm can sustain its performance over the long-term. Some experts highlighted that while they realize that software markets are highly competitive, they believe it is important for Palantir to demonstrate not only short term growth but also establish a defensible long term market position.
Sector experts warned investors not to overlook execution risk when considering any stock from the software industry. Most noticed that despite Palantir being well-positioned operationally, it still faces intense competition from big names such as Microsoft and Amazon – which may challenge the future potential of their current product lines.
Overall, most analysts agree that while Palantir’s performance was healthy and consistent with their expected fiscal year 2021 guidance, they would like to see more evidence on how the firm plans on maintaining robust growth rates over time.
Palantir’s Long-Term Prospects
Palantir Technologies Inc (NYSE:PLTR) has had a roller coaster of a ride in its short life as a public company, with its stock soared and dropped after the tech giant released its earnings report this week. Investors scrutinised the numbers and were not entirely pleased with its performance. This has raised doubts about Palantir’s growth prospects and it now needs to prove it can sustain its growth and become a major player in the tech industry.
In this article, we’ll discuss Palantir’s long-term prospects.
Need to Prove Sustainability
Palantir Technologies Inc. (PLTR) reported a slight earnings miss for the fourth quarter of 2020, reducing the company’s stock price and increasing speculation about the long-term prospects for the data analytics provider. Palantir needs to prove that its current momentum is sustainable if it desires to maintain its current market capitalization.
The company was founded in 2004 by PayPal co-founders Peter Thiel and Joe Lonsdale, with a mission to “solve hard problems and protect civil liberties.” Over the past 16 years, Palantir has achieved considerable success in providing data analytic services to various customers, ranging from government agencies to Fortune 500 corporations. The degree of success Palantir has achieved so far suggests that it has the capacity and operational know-how to deliver on its promises.
What investors are concerned about is whether or not Palantir can sustain its level of growth over the long term. Despite achieving impressive revenue growth rates in prior years (88% y/y growth in 2019), Palantir’s Q4 revenue growth decelerated significantly in 2020 compared to earlier years – growing only 4% y/y. This earnings miss signals potential challenges for Palantir going forward as it will need to prove that it can overcome such bumps on the road before investors can trust that its shares have viable long-term prospects.
Growing Customer Base
Palantir Technologies is renowned for providing big data analytics to corporations and government entities. Founded in 2004, the Palo Alto-based company has since become a corporate powerhouse, boasting an impressive customer base in major industries such as finance, healthcare, defense and intelligence.
The company’s growth strategy has consisted of collaborating with existing customers to build loyalty and solidifying relationships with partners such as Microsoft and Amazon Web Services (AWS). To support its growth trajectory further, Palantir raised $140 million in a private offering round earlier this year.
Looking ahead, Palantir’s efforts will increasingly focus on sustainability—demonstrating that the company can consistently sustain its growth rates even despite changing market conditions. Revealingly, the company’s second quarter earnings put it slightly behind Wall Street expectations. Therefore, Palantir needs to prove that it can continue to attract new customers while fostering its existing ones and creating larger strategic partnerships.
Overall, despite recent drops of stock prices due to just missing estimates during second quarter earnings reports, investors remain optimistic about its long-term prospects.
Expanding Product Offering
To sustain its long-term growth, Palantir must focus on expanding its product offering. It is currently offering products in data integration and analytics, enterprise intelligence and software engineering, with the latter being its main focus. This means that Palantir has largely been focusing on software development rather than the wider range of technologies that make up big data solutions. To address this shortcoming, Palantir must develop a comprehensive portfolio of products and services encompassing various aspects of big data solutions.
Moreover, Palantir should start leveraging aspects of machine learning and artificial intelligence in its products and services to truly capitalize on current trends in the industry. This could potentially lead to new opportunities for revenue growth, but it would also require significant investments in research and development. Additionally, expansion into related areas such as blockchain technology could also help broaden the scope of their offerings as it addresses security issues associated with managing large amounts of data.
Finally, by expanding their product offerings into other mature industries such as healthcare or finance they could perhaps benefit from market saturation more quickly than continuing with their current focus areas alone as these industries tend to have longer payment cycles associated with them. For Palantir to prove itself to potential investors and consumers alike it must prove that it can create sustainable long-term growth through solid product expansion strategies.
In conclusion, Palantir has had an impressive growth this past quarter, yet it still failed to meet analysts’ expectations. While these stumbles can sometimes be worrisome for some investors, the company still delivered solid results and its potential for future success is encouraging. That said, Palantir will need to demonstrate a sustainable paradigm going forward to keep the momentum amid fierce competition from its peers. Analysts and investors alike will closely watch the company’s upcoming performance to gauge if it can maintain its recent growth rate.