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What Investors Need to Know Ahead of Palantir's Earnings Report

Moomoo News Global joined discussion · Nov 1, 2024 19:48

$Palantir (PLTR.US)$ is set to report third-quarter earnings after the closing bell on Monday, Nov.4, with investors likely to be watching for commercial segment growth and updates about the demand for the data analytics company's artificial intelligence (AI) platform.

Consensus Estimate

● Analysts expect Palantir Technologies to report a profit of $0.04 per share, up 40.67% from the year-ago quarter.

● The Consensus Estimate for revenue is projecting net sales of $703.69 million, up 26.07% from the same quarter last year.

What Investors Need to Know Ahead of Palantir's Earnings Report

Commercial revenue growth is the key metric

Palantir stock has advanced 161.88% in 2024. Shares set an all-time intraday high of 45.14 on Oct. 28. Meanwhile, Palantir joined the S&P 500 index on Sept. 23. The inclusion enables mutual funds and institutional investors to buy Palantir stock.

Palantir has already mined the AI opportunity with government customers for intelligence gathering, counterterrorism and military purposes. Now Palantir aims to use generative AI to spur growth in the commercial market.

Analysts expect commercial revenue to be $330 million, accounting for almost half (47%) of the company's projected total revenue. This would represent 32% growth from the year-ago period. The company continues to make progress with its "Artificial Intelligence Platform," initially rolled out in early 2023. Palantir hosted its fifth AIP event in September.

At AIPCon 5, clients such as the National Geospatial-Intelligence Agency, Aramark, and Mount Sinai demonstrated Palantir AI technologies in better supply chain management, operational efficiencies and health patient care.

On October 23, 2024, Palantir announced its partnership with L3Harris Technologies (LHX) to help accelerate L3Harris’s digital transformation. The partnership includes a strategic collaboration covering US Army programs, including the TITAN program, in modernizing operations and weapons defense systems.

In addition, Palantir was awarded a $99.8mm 5-year contract by DEVCOM Army Research Laboratory to extend Maven Smart System access to the Army, Air Force, Space Force, Navy, and US Marine Corps.

AI Platform demand drives growth

"We tuned into AIPCon 5, the fifth installment of Palantir's conference series on AIP in the last 12 months," said Jefferies analyst Brent Thill in a report. "Over 100 organizations demonstrated and spoke publicly about their work for the first time, including industry verticals in railroad manufacture, automobile supply, government defense and healthcare, go-to-market momentum is accelerating.”

However, Palantir has not disclosed pricing for AI products. Some analysts say Palantir needs to show more revenue progress with generative AI commercial deployments.

Further, Palantir in August hired Mike Gallagher, a former Wisconsin congressman, as head of its defense business.

Palantir's exaggerated valuation multiples increase pressure

One of the primary reasons for Wall Street skepticism regarding Palantir’s ability to sustain its bullish momentum after the Q3 results is the extremely high valuation multiples at which the company trades.

The average Palantir price target is $28.83, implying a decline of more than 35% in the next 12 months — the most downside seen for any stock in the US benchmark, according to data compiled by Bloomberg.

Currently, Palantir is valued at metrics such as 35 times its forward sales, 120 times its forward earnings, and 135 times its cash flows. This valuation makes $NVIDIA (NVDA.US)$ —arguably the biggest leader in AI—appear relatively discounted by comparison despite being considered an expensive stock and despite Nvidia’s higher growth projections for both revenue and earnings.

What insights do options data provide?

The predicted move after earnings announcement was ±14.1% on average vs an average of the actual earnings moves of 16.3% (in absolute terms). This shows that Palantir tended to be more volatile than the options market predicted for the earnings stock price reaction.

Over the last 12 quarterly earnings, during regular trading hours after the earnings was released, the biggest increase was +30.8%, and the largest price decrease was -21.3%, according to Market Chameleon.