Michael Kamerman, CEO of Skilling, shares his opinion on what stock you should watch this week.
The market has been ruthless in recent times, meaning that the current investing environment isn’t one for the weak-willed. Dips and troughs have affected companies across the board including Palantir, although all may not be lost.
Last week, while we saw signs of resurgence from dip buyers rallying the stock up 9.5%, following a couple of 5% increases weeks beforehand, the stock remained down 15% over the last month. It did, however, push above its 20-day moving average for the first time since March, leaving investors’ eyes on the stock.
Palantir’s earnings report published on May 5th was initially met with an air of dismay from investors. The stock jumped down from $9.41 and fell to $6.43. However, by simply glancing at their earnings report, it would be hard to understand why investors might be disappointed. Total revenue grew 31% YoY from 2021, commercial revenue increased by 54%, and the firm’s customer count increased by 86%; all of which indicate promising growth.
Taking a closer look into these results sheds light on investors’ dismay. While total revenue grew by 31% to $446 million, Palantir’s current market cap is just over $18 billion, with a price to earnings ratio of 68 meaning that it may be overvalued. For comparison, the price to earnings ratio of the S&P 500 is around 23.
Palantir’s goal is to continue growing revenues by 30% each year and if the firm hits those goals, revenues will be nudging towards $1 billion annually. A large part of their business still resides in data analytics contracts with US defence and intelligence agencies, although they have made inroads in the private sector of late and have recently teamed up with commodity trading giant Trafigura.
What this will mean for Palantir’s share price and valuation in the short-term is still uncertain, but what is certain is that investors will need to pay close attention to the market and potential government rate hikes to make an informed decision on their trading.
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Not investment advice. Past performance does not guarantee or predict future performance.