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Palantir Stock Is a Cautious Buy Ahead of Q4 Earnings

Palantir’s (NYSE:PLTR) stock price has been decreasing recently due to worries about its profitability and ability to maintain large profits. A startup business will typically see a decrease in earnings as the company generates more rev…

Palantir’s (NYSE:PLTR) stock price has been decreasing recently due to worries about its profitability and ability to maintain large profits. A startup business will typically see a decrease in earnings as the company generates more revenue. Still, not all companies can keep up with growth rates like this one. However, it may be struggling now too early days before we know how well these new hires perform on an ongoing basis, so buyer beware!

Source: Ascannio / Shutterstock.com

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Peter Thiel founded the company, a Silicon Valley-based software firm. They mainly focus on data analysis to help law enforcement track criminals or other individuals with criminal goals (such as financial gain).

Palantir is set to release its fourth-quarter earnings before the market opens on Feb. 17, so investors are looking forward to a big release. The company has reported some impressive growth in recent months, so analysts and investors expect that trend to continue. According to Palantir, sales will grow approximately 30% year over year in Q4. Meanwhile, the analytics company expects $418 million in revenue and a non-GAAP operating margin of 22%.

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The company expects sales to increase 40% year over year to $1.53 billion, and it also anticipates a free cash flow of nearly $400 million. Considering these strong numbers and the sharp sell-off, the time to purchase PLTR stock is now.

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Growth Stocks Sell-off & PLTR Stock

This week is a crucial time for stocks, as earnings release. The market’s focus turns to fourth-quarter earnings, increasing for economically sensitive stocks.

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Investors will want to keep an eye out for any companies that may be struggling under the weight of higher prices. It’s possible these institutions could see their earnings vulnerable as a result. However, there is still hope in sight, thanks largely due to President Joe Biden’s economic policies, which have helped fuel strong growth thus far throughout his first term.

Earnings growth estimates for the cyclical space are up by 9.5% which is said to be quite impressive. The cyclical companies are expected to do better going forward and should over-deliver on earnings within this period of time as well as those in the future. But earnings estimates in the tech sector are down by 1.6%.

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Much of that has to do with tech companies experiencing a slowdown as things get back to normal. After a couple of years of staying at home, people are looking to spend more time offline. And that is impacting the bottom line and portfolios of investors.

Separately, the markets were caught off guard this week when it became clear that the Federal Reserve would hike rates as soon as March. The central bank has been playing catch-up to bring inflation under control. But now they’ll have an even harder time doing so because of recent hawkish decisions from their members.
A more aggressive stance means higher borrowing costs for businesses and consumers, leading both parties down paths where money becomes less important than ever before.

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Latest Moves

U.S. intelligence agencies have used Palantir Technologies to create predictive algorithms for counterterrorism and counterintelligence. The company also offers a suite of tools for law enforcement agencies to conduct surveillance and investigations. During the pandemic, the company was one of the premier growth stocks on the market.

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However, PLTR stock has been losing some steam in the last few months.

Palantir announced plans to expand to South Korea and collaborate with Hyundai Heavy Industries Group to build a big data platform. They hope this will help them automate the procurement process for their clients, including shipbuilding and offshore engineering. According to a source quoted by Bloomberg, the multi-year deal is worth $25 million.

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Palantir will be offering its services to Scuderia Ferrari. They will also be bringing their Foundry platform to the Motorsport team to use it as needed to make decisions and improve performance.

With the Foundry, engineers who work on the racetrack and in Maranello — who lack the computing power to analyze race data — will finally have access to a tool that can help improve performance and plan around a range of possible outcomes.

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Finally, Palantir launched a new certification for its software platform, Foundry. The Palantir Certification Program will allow people to showcase their skills and use these skills to help others. It’s a great opportunity for both employees looking for a new role and employers searching for qualified talent.

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What Should You Expect from PLTR Stock

Artificial intelligence technology is becoming more and more common in different fields. The government has probably seen a lot of benefit from it and made good choices by signing on to this company. Assistants like these can process and analyze large amounts of data, so tasks like coordinating millions of troops worldwide are easier to do. Palantir has long been shrouded in secrecy. But it’s also been a favorite among government agencies. For the first three quarters of fiscal 2021, 44% of the $1.1 billion total revenue generated represents government contracts.

A big debate surrounding PLTR is that it needs to build out its commercial business. Gotham was first released to governments in 2008. But later that same year, Palantir realized its business customers needed a similar report building and analysis tool. Foundry was then released. It is now one of the most influential companies in the energy, transportation, financial services, and healthcare sectors. Big Data is one of the hottest technologies on the market today, and its growth has an impact across many industries.

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The number of private-sector clients grew 46% in Q3. This led to an increase in commercial revenue year-over-year. Nevertheless, investors wanted more traction on this end. Plus, there is no comparison between the number of commercial clients Palantir possesses versus IBM (NYSE:IBM) or Snowflake (NYSE:SNOW), for example. The total addressable market (TAM) is huge. However, it will take time for the company to tap its potential fully.

The Bottom Line

Palantir can be helpful to a long-term buy-and-hold investor. It’s not a good investment for the short term. But it can diversify your portfolio overtime to make sure you’re protected from stock market volatility.

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Investors concerned about the future need not be with this one. The data analytics company is already guiding for excellent numbers in the forthcoming earnings report. On Feb. 17, 2022, the earnings report is expected to be released which might help the stock move higher if these numbers are better than expectations. Considering its history, it should not surprise you if the company beats expectations. It has made a habit of doing so.

Therefore, the time to purchase this one is right now.

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On the publication date, Faizan Farooque 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.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. You can check out his analysis on InvestorPlace and TipRanks.

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