Palantir's Q2 Performance Has Analysts Divided

Palantir Technologies Inc PLTR clocked 26% revenue growth in second-quarter FY22 to $473 million, beating the consensus of $471.3 million.

Morgan Stanley analyst Keith Weiss maintained Palantir with an Equal-Weight and cut the price target from $13 to $11. 

Contract delays in the government business led to a 2022 outlook that was below expectations, Weiss noted. The decision to accelerate investments during a period of uncertainty weighs on NT profitability.

Raymond James analyst Brian Gesuale reiterated a Strong Buy and $20 price target. The re-rating reflected delays in government spending across the government peer group, elongated non-US commercial sales cycles across the broader commercial IT ecosystem, and continued ramping of costs as it builds corporate infrastructure to support a $4.5 billion business by 2025.

At the same time, positives included a record jump sequentially in government customers, an acceleration of non-SPAC commercial revenue, and the realization of moderating of stock comp expense and cessation of new SPAC investments. 

Fundamentally, the bullish thesis hinges on government revenue re-accelerating with budget growth, more products and customers, and an increasingly dangerous geopolitical backdrop, as well as steady state commercial growth ex-SPAC contributions in the mid-to-upper 20s% as the company ramp its sales force, customer base, and products. 

RBC analyst Rishi Jaluria reiterated an Underperform and price target of $6. Palantir reported weak Q2 results, marked by another Y/Y decline in Total Deal Value, and slashed FY guidance, leading shares down 14% today vs. NASDAQ flat, he noted.

As expected, management pulled the 30%+ revenue growth guide for at least 2022 (now expects ~23%) and reduced the 2022 operating margin outlook to just 18% (vs. 27% prior and 31% in 2021). 

However, management decided to roll out aggressive 2025 targets, including $4.5 billion in revenue (which implies a 33% CAGR off of the revised 2022 guide) and GAAP profitability, which Jaluria found perplexing. 

Deutsche Bank analyst Brad Zelnick downgraded Palantir to Sell from Hold with a price target of $8, down from $11. The company's second-quarter report leaves "little to hang our hat on," Zelnick said.

Zelnick saw the results leave little support to his previous positive thesis on the company's government business, given the further deceleration off easier comps and lower visibility going forward. 

In addition to the lowering of sales expectations, Palantir is also "aggressively" spending, which is elevating its risk profile, contends Zelnick. 

Citi analyst Tyler Radke cut the PRICE TARGET to $6 from $7 and reiterated a Sell. The company's Q2 results and outlook fell well short of expectations, Radke noted. 

He thinks the results demonstrate the "diminishing tailwinds" from COVID-related contracts and investments, combined with the reliance on "large lumpy government deals with uncertain deal timing."

Price Action: PLTR shares traded lower by 6.17% at $9.22 on the last check Tuesday.