Stock Story -
What Happened: Shares of data-mining and analytics company Palantir (NYSE:PLTR) fell 8.3% in the morning session after major indices declined (Nasdaq down 2.3%, while the S&P 500 index fell 1.9%) on fresh concerns about the strength of the economy after the Bureau of Labour Statistics reported non-farm payrolls for July 2024, which revealed that the U.S. economy added 114 000 jobs (versus expectations for +179,000 jobs). In addition, the data revealed that the unemployment rate rose to 4.3%, the highest since October 2021.
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. 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.
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? Find out by reading the original article on StockStory, it's free.
What is the market telling us: Palantir's shares are very volatile and over the last year have had 32 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 6 months ago, when the stock gained 28.5% on the news that the company reported fourth-quarter results with expectations for revenue growth to accelerate in the next fiscal year, highlighting growing demand for its new artificial intelligence platform (AIP), which was launched in 2023. It is also encouraging to learn that the company has improved the time it takes to deploy AIP and integrate with client's data from "weeks and months to as little as a few hours."
The icing on the cake is adjusted operating income well above expectations, showing that the company is not sacrificing profits for the higher topline growth.
Also, its revenue, billings, and free cash flow exceeded Wall Street's expectations in the quarter, and its gross margin improved. Notably, the US commercial business significantly contributed to the solid performance during the quarter, as revenue in the segment grew 70% year on year and 12% sequentially.
Looking ahead, the company expects the US commercial business to grow at least 40% in 2024. A minor negative was that revenue guidance for the next quarter missed analysts' expectations. Overall, this was a very solid quarter for Palantir.
Palantir is up 48% since the beginning of the year, but at $24.55 per share it is still trading 14.8% below its 52-week high of $28.81 from July 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 $2,582.
