Palantir Technologies (NYSE: PLTR) is still growing, but not as fast as investors had hoped. Investors appear to be getting impatient, sending shares of Palantir down 24.5% for the month of August, according to data provided by S&P Global Market Intelligence.
Palantir is a CIA-backed data analytics company that went public in 2020 to much fanfare, with the company forecasting annual revenue growth north of 30% for the foreseeable future. The stock has been volatile in the years since its debut, with investors torn between the long-term promise of the business and the somewhat underwhelming actual results.
Palantir's most recent quarterly results, announced in early August, continued the trend. The company matched earnings expectations on revenue that was up 13% year over year. The company also raised its full-year 2023 revenue view to $2.212 billion, slightly above the $2.21 billion consensus and up 16% from a year ago.
That's solid growth, but not the sort of growth that investors were told to expect just a few years ago. Palantir has evolved its business from data analytics to artificial intelligence (AI) and says it is seeing strong traction in the marketplace, but with expectations sky-high for this company and its technological prowess even solid results can fall flat compared to market expectations.
Even after the decline, Palantir shares are still up 130% for the year. The company trades at a rather rich 16 times sales and 56 times future earnings, meaning a lot of that future growth is arguably already priced into the valuation.
While the potential is there, Wall Street remains worried about how long it will take for investors to see the payoff. Late in the month Morgan Stanleydowngraded Palantir to underweight, from equal weight. Analyst Keith Weiss wrote that the euphoria surrounding Palantir is overdone, creating an unfavorable risk/reward setup for investors.
"While bringing product to market was enough to inspire investor optimism in the past six months, we see the focus shifting to investors parsing out the companies that can drive revenue from these offerings in the most timely and effective ways," Weiss wrote. "Palantir still appears very early as the company has clearly communicated that it has yet to determine a monetization strategy for its solution."
There are times when investors need to separate their enthusiasm about a company from the stock. Palantir clearly has a bright future ahead of it, but with so much of that future already priced into the stock it is unclear whether this will be a market beater any time soon.
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