What Happened:

Shares of data-mining and analytics company Palantir (NYSE:PLTR) fell 15.1% in the morning session after the company reported first quarter results with billings falling below Wall Street's expectations. Free cash flow also missed. On the other hand, Palantir beat analysts' revenue expectations this quarter. The top line benefited from growing demand for its AIP(artificial intelligence platform), US commercial business, and a reacceleration in the US government business. Next quarter's revenue guidance also came in higher than Wall Street's estimates. Overall, this was a mixed quarter for Palantir.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Palantir? Access our full analysis report here, it's free.

What is the market telling us:

Palantir's shares are very volatile and over the last year have had 40 moves greater than 5%. But moves this big are very rare even for Palantir and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The previous big move we wrote about was 14 days ago, when the company gained 5.2% after equities ( Dow +0.8%, S&P 500 +1.2%, Nasdaq +1.6%) surged for the second straight day with the start of earnings season showing that the health of companies that reported Q1 earnings was solid and that the economy seemed to be holding up. Only about a fifth of S&P 500 companies reported, but roughly three-quarters of beat expectations. This may be spurring dip buying following elevated volatility in the previous two weeks of trading. Treasury yields pulled back suggesting markets are tempering the growing concerns about the possibility of higher for longer interest rates following recent economic data highlighting sticky inflation, ahead of the Fed's expectations.  

As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.

Palantir is up 30.7% since the beginning of the year, but at $21.66 per share it is still trading 18.2% below its 52-week high of $26.46 from March 2024. Investors who bought $1,000 worth of Palantir's shares at the IPO in September 2020 would now be looking at an investment worth $2,281.

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