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Thursday, September 29, 2022

Palantir Crushes Earnings — Is $PLTR Still a Buy Now?

Palantir (NYSE:PLTR) reported earnings this morning, and it delivered strong numbers and surprise beats across the board. The stock has been controversial since its direct listing in October 2020. I purchased this stock in the $9 range, and it ripped to $45 before plummeting back to the low $20s. I recently did a writeup and video on Palantir and said I thought the stock was an opportunity in the low $20s and a no-brainer below $20. Unfortunately, the stock did not fall below $20, and earnings has the stock up over 14% as I’m writing this. 

Palantir has a cult following, and it reminds me somewhat of Tesla (NASDAQ:TSLA). Alex Karp, Palantir’s CEO, is a quirky and intelligent guy, much like Tesla’s Elon Musk. This is not necessarily a reason to buy the stock, but it is an important consideration for potential shareholders. Stocks like Tesla and Palantir often trade at unique valuations and carry more volatility. I expect this trend to continue, but if retail investors continue to own shares in their long-term investment portfolios, it could accelerate the share price over time, much as with Tesla. A premium is often paid for these “cult stocks.” I am long Palantir, but I do understand the risks. 

Another thing I think is interesting about Palantir is its hybrid crossover into cybersecurity. Of course, the company is not typically thrown into the cybersecurity stock bucket. After all, Palantir is a big data analytics software company that helps government agencies and companies manage and analyze data. However, with the increased hacks and high-profile security breaches, businesses are faced with complex challenges that require sophisticated solutions. Palantir offers highly secure data compared to most competitors. It started as a company laser-focused on government-related clients, so its solutions were built with security as the backbone. Commercial-focused vendors cannot say the same, and this provides a competitive advantage for Palantir. In my opinion, commercial clients are the key to Palantir’s long-term growth, so this is an important fact to consider when you’re evaluating the stock as a potential investment. 

Here are the Q2 2021 earnings highlights from Palantir’s press release:

  • Total revenue grew 49% year over year to $376 million
  • US commercial revenue grew 90% year over year
  • Palantir closed 62 deals of $1 million or more, of which:
    • 30 deals are $5 million or more
    • 21 deals are $10 million or more
  • 20 net new customers were added in Q2 2021, total customers were up 13% quarter over quarter
  • Commercial customer count increased 32% quarter over quarter
  • Cash flow from operations of $23 million, representing a 6% margin
  • Adjusted free cash flow of $50 million, representing a 13% margin
  • GAAP net loss per share, diluted, of -$0.07
  • Adjusted earnings per share, diluted, of $0.04

In the below video, I break down Palantir’s earnings report and offer my opinions on the company and its stock. 

*Stock prices used in the below video were during premarket trading of August 12, 2021. The video was published on August 12, 2021.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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