Many stocks have gone in the red over the past few months and this is due to several reasons including the general investor sentiment. However, Palantir Technologies (NYSE:PLTR) has been down for a long time and PLTR stock fell further after the company reported fourth-quarter results.
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Investors expected solid numbers for the quarter but the company has disappointed and its future outlook also does not look strong.
PLTR stock has hit a new 52-week low today and is trading at $10.90. I think the stock will continue the downward trend for a while. The Denver-based company has a lot working in its favor but the numbers prove otherwise.
PLTR stock is down 43% since the start of the year and has dipped 64% over the past year. With that in mind, let’s dig deeper into my investment thesis for PLTR stock.
Fourth-Quarter Results Are Disappointing
Palantir reported revenue of $433 million and earnings of 0.02 cents per share. The company projected revenue of $443 million for the current quarter which is only slightly above the revenue generated this quarter.
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It continues to expect annual revenue growth of 30% through 2025. Palantir has generated significant revenue but it still reported a net loss of $156.19 which is much wider than the loss of $148.34 it reported in the same quarter the previous year.
It added 34 new customers in the quarter and closed 64 deals of $1 million or more, including 27 which were $5 million, and 19 which were at least $10 million. The company also grew the commercial business with revenue of $645 million.
Its commercial revenue increased more than 100% in the year. Those concerned about the heavy reliance on government contracts will be happy to see that the commercial clients are growing and the number is impressive.
I am impressed with the business model and the number of customers it continues to attract on the government front and the commercial sector, however, the numbers aren’t reflecting the true potential of the company and this is hurting PLTR stock.
It is natural for investors to lose patience. My colleague at InvestorPlace Ian Bezek believes that the stock isn’t a buy yet and looks overpriced.
Profit Looks Miles-Away
Despite attracting new customers, generating solid revenue, and growing the commercial business, the company is reporting operating losses. The loss is a cause of concern.
When will the company turn profitable? Nobody knows. Its business is in good shape, it is growing and the fundamentals are impressive but it could take a few years before we finally see a profit.
Palantir has a cash balance of $2.3 billion and no debt which is encouraging. Despite the strong numbers and solid history, PLTR stock is struggling and hasn’t shown signs of recovery since the past six months which is making investors frustrated. It has dipped from $25 to $10 in the six months so it is not just the fourth-quarter earnings to blame.
The Bottom Line
Palantir is a solid company and the business is growing but the stock is trading lower than ever. It has expanded across the commercial sector, signed new clients, and projects revenue growth of 30% over the next four years. Several things are going right for the business but the bears are out this quarter.
If you hold PLTR stock, you will have to remain patient and hang on to it for the next couple of years to see some returns. Do not expect the stock to rebound anytime soon. But if you are wondering whether to buy the stock in the dip, hold your horses.
PLTR stock will continue the downward journey for a while before it rebounds and you will get several opportunities to enter. For now, steer clear of the stock.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long-term gains. Her knowledge of words and numbers helps her write clear stock analysis.
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