$Palantir Technologies Inc.(PLTR)$ will be reporting its fourth-quarter 2024 report after the market closes on 03 Feb (Monday). Palantir offers artificial intelligence (AI)-powered data analytics software platforms.
I am holding Palantir for long term as I believe AI powered platforms for machine learning and data analytics would be the next wave in the AI revolution.
Palantir has a good track record of surpassing Wall Street's revenue and earnings estimates, and issuing guidance that also exceeds expectations. Given this track record, it seems likely Palantir's Q4 report will be stronger than Wall Street is expecting.
Wall Street expects Palantir's Q4 adjusted earnings per share (EPS) to jump 38% year over year to $0.11.
Why Palantir Upcoming Earnings One Of Most Anticipated
If you are a tech investors, you would realise that Palantir’s stock was the best-performing stock on the S&P 500 index. It gained 341%, versus the index's 25% return. This would make it the one of the most anticipated to watch for this last quarterly earnings for 2024.
We need to understand that the amazing performance was because of the largely improved adoption of Palantir Artificial Intelligence Platform (AIP). I have written on quite a number of articles on that.
Though there are some investors who have been concerned over Palantir high valuation in 2024, but I always believe that as long as a company (stock) continue to make products and customers are buying, it will continue to grow.
With the new Trump administration, there have been some market discussion that Palantir's business could get an added boost which might include possibility that Palantir could get work from the president's newly created Department of Government Efficiency (DOGE), headed by Elon Musk, Tesla's CEO.
This discussion is reasonable, considering that Palantir's platforms are aimed at increasing efficiency and effectiveness, and the company already does much work for various agencies within the U.S. government.
And Palantir did show in the third quarter that its government business, which also does work for the governments of our allies, accounted for 56% of its total revenue.
Palantir (PLTR) Third Quarter Positive Earnings Call Gives Investors 93.75% Gains
Since the earnings calls on 04 Nov 2024, which has a positive sentiment, Palantir has gained 93.75% since. The earnings call highlighted significant growth and achievements, particularly in the U.S. market, with strong revenue and cash flow figures, inclusion in the S&P 500, and high operating margins.
However, challenges in international markets and reduced revenue from strategic contracts were noted. Overall, the sentiment is largely positive due to the overwhelming growth and financial performance.
Palantir (PLTR) Guidance To Focus On Intensifying AI Revolution
In the Q3 2024 earnings call, Palantir reported exceptionally strong results with a 30% year-over-year revenue growth, driven by the intensifying AI revolution. The company's U.S. business experienced 44% year-over-year and 14% sequential revenue growth, with the U.S. government sector seeing a 40% year-over-year and 15% sequential increase.
The U.S. commercial segment continued its momentum with a 54% year-over-year and 13% sequential revenue growth. Palantir highlighted the impact of its AI Platform (AIP) in various sectors, such as insurance and rail, delivering significant operational improvements and financial outcomes, including reducing underwriting response times from two weeks to just three hours.
The company closed 104 deals over $1 million last quarter, with U.S. commercial total contract value (TCV) reaching nearly $300 million, and customer count growing 77% year-over-year. Palantir's strategic focus remains on leveraging AI models in production, emphasizing the importance of contextual integration within enterprises to maintain market differentiation.
The company's robust financial performance led to an increase in full-year revenue guidance to $2.807 billion, representing a 26% year-over-year growth rate, and a raised adjusted free cash flow guidance to over $1 billion.
Strong Government and Commercial Business To Drive Growth Again
Exceptional Revenue Growth
Revenue grew 30% year-over-year in Q3, with U.S. business achieving 44% year-over-year and 14% sequential revenue growth.
Significant U.S. Government Business Growth
U.S. government business revenue grew 40% year-over-year and 15% sequentially, marking the strongest growth in 15 quarters.
In the fourth-quarter, Palantir Technologies (PLTR) has extended its partnership with the U.S. Army through a contract worth $400.7 million over four years, with a total ceiling of $618.9 million. The agreement continues the Army Vantage capability support for the Army Data Platform (ADP) through 2028.
These are some of the positive points that will helped Palantir in the fourth quarter earnings
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Platform serves over 100,000 users with record-high usage in 2024
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Integrates 180+ unique data sources across Army operations
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Demonstrates strong customer retention and platform expansion since 2018
Record Cash Flow
Palantir generated $420 million in cash from operations and $435 million in adjusted free cash flow, representing margins of 58% and 60%, respectively.
Inclusion in S&P 500
Palantir was added to the S&P 500, underscoring sustained profitability and growth.
Strong Commercial Business Performance
U.S. commercial business grew 54% year-over-year and 13% sequentially, with customer count growing 77% year-over-year.
High Adjusted Operating Margin and Cash Flow
The company reported an adjusted operating margin of 38% and adjusted free cash flow of 60%, with a Rule of 40 score increasing to 68.
Challenges On How Palantir Commercial Business Revenue Might Impact Earnings
Even though we are seeing strong commercial business performance in the third quarter and this would continue in the fourth quarter, but there are headwinds which might continue from third quarter to affect its earnings for the fourth quarter.
International Commercial Revenue Challenges
International commercial revenue experienced a 7% sequential decline due to headwinds in Europe and reduced revenue from a government-sponsored enterprise in the Middle East.
Decline in Revenue from Strategic Commercial Contracts
Revenue from strategic commercial contracts declined to $9.6 million for the quarter, with further declines expected in the fourth quarter.
Technical Analysis - Inverse Head And Shoulder
If we looked at how Palantir have traded on Thursday (30 Jan) before its earnings, it has gained 1.83%, closed at , 81.22 very close to it’s all-time highs of 84.80.
I would say that is a nice pre-earnings runup but I would be watching how Palantir would be trading on Friday (31 Jan).
From the technicals I have noticed a inverse Head and Shoulders which could lead to some more upside but this is just a pattern, I would be looking at the price action.
We are seeing higher lows where the bulls are looking for expansion, but if we do flush the lows at 73 then we might see a daily downtrend into support below 72 to 70.
So far, if we noticed that the bulls never lost control of the higher lows, but we might not see too much movement before the earnings. I think the big focus is whether Palantir can increase their revenue expansion rate as I have mentioned in some of the challenges it faced. Palantir need this to justify the very rich valuation.
If Palantir can expand the revenue growth profile to accommodate the heighten valuation, then we could see a significant movement on Monday (03 Feb) after the earnings call.
Summary
Overall, I think the market is still very much trying to defend the level with very small movement before Palantir earnings on Monday (03 Feb), so the key would be whether Palantir can increase its revenue expansion especially on the commercial side, this would very much put investors concern of high valuation at ease. Then we might see a nice upside move for Palantir.
Appreciate if you could share your thoughts in the comment section whether you think Palantir would be able to provide a better revenue expansion rate .
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
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