On Tuesday, William Blair maintained its Underperform rating on Palantir Technologies Inc . (NYSE: NYSE:PLTR), despite the company's shares rising by 13% following significant contract victories. The increase in stock price was attributed to the government division's success in securing two major contracts this year, known as MAVEN and TITAN. However, the firm pointed out that Palantir's commercial revenue of $317 million fell short of the anticipated $330 million.
The analyst noted that while U.S. commercial revenue outperformed international figures, the growth of international commercial revenue was a mere 2%, marking the slowest pace since the third quarter of 2022. The international commercial revenue for this quarter remained unchanged from the fourth quarter of 2022. Although the U.S. commercial division, excluding SPAC revenue, saw a growth rate of 59%, this was a slowdown from the 70% growth observed in the previous quarter.
Overall, commercial revenue growth decelerated to 26%, the lowest rate since the third quarter of 2023. The firm also highlighted that despite these positive developments, Palantir's new revenue guidance for 2024 merely aligns with the consensus estimates from two years prior. The analyst suggested that at some point, the company's valuation will become a significant factor.
In comparison to its competitor Snowflake (NYSE: SNOW) (NYSE:SNOW), which holds an Outperform rating and is valued at $38 billion, Palantir's market capitalization stands at $118 billion. This is despite Snowflake generating greater revenue of $3.5 billion compared to Palantir's $2.8 billion for the current fiscal year, and both companies growing at similar rates within the data analytics market.
In other recent news, Palantir Technologies Inc. has shown significant financial growth, with its Q3 earnings exceeding expectations due to a surge in artificial intelligence (AI) demand. The company reported a robust 30% year-over-year revenue growth, largely driven by a 44% growth in its U.S. business. The U.S. government sector and commercial sector expanded by 40% and 54% respectively, contributing to a strong financial performance.
Analysts at DA Davidson maintained a neutral rating on Palantir while raising the price target to $47.00 from $28.00, following these impressive results. They noted the company's ability to capitalize on the increasing enterprise interest in AI applications, as evidenced by sustained top-line acceleration and broader market demand for AI solutions.
Despite a 7% sequential contraction in international commercial revenue, Palantir secured important contracts such as a multi-year renewal with BP (NYSE:BP). The company also raised its full-year revenue guidance to $2.807 billion, indicating a 26% year-over-year growth rate.
InvestingPro Insights
Recent InvestingPro data provides additional context to Palantir's financial performance and market position. Despite William Blair's Underperform rating, Palantir's stock has shown impressive momentum, with a 141.18% year-to-date price return and a 119.22% return over the past year. This strong performance is reflected in the company's market capitalization of $92.74 billion.
However, investors should note that Palantir is trading at a high P/E ratio of 225.92, which aligns with William Blair's concerns about valuation. This high multiple suggests that the market has priced in significant future growth expectations.
InvestingPro Tips highlight that Palantir holds more cash than debt on its balance sheet and has impressive gross profit margins, which stood at 81.39% for the last twelve months as of Q2 2024. These factors contribute to the company's financial stability and operational efficiency.
For readers interested in a deeper analysis, InvestingPro offers 21 additional tips for Palantir, providing a comprehensive view of the company's financial health and market position.
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