Tech stocks are expected to remain under pressure in the near term, as investors panic about slowing growth rates, soft employment data, and the unraveling yen carry trade. The ongoing earnings season should also be a key driver of stock prices, as market participants closely watch tech companies' forecasts as the artificial intelligence (AI) race enters a new leg.
After a solid performance in the first half of the year, the tech-heavy Nasdaq Composite ($NASX) has pulled back 10% from all-time highs, entering correction territory. Some market-watchers believe the Federal Reserve should have announced interest rate cuts in its last meeting, given that inflation numbers have cooled off amid sluggish consumer spending and an uptick in the July unemployment rate.
Considering these factors, let’s see if you should buy or sell Palantir Technologies (PLTR) stock ahead of its Q2 earnings report tonight.
What Does Wall Street Expect from Palantir in Q2 of 2024?
Palantir is expected to announce its Q2 earnings after the market closes today. According to analyst estimates, sales are slated to increase by 22.4% year over year to $652 million, while earnings are forecast to expand by 60% to $0.08 per share. In the year-ago period, Palantir reported revenue of $532.7 million and earnings of $0.05 per share.
Wall Street expects sales to rise by 21.3% to $2.7 billion and earnings to widen by 32% to $0.33 per share in 2024. Any downward deviation from these figures will likely result in a steep drawdown in share prices, given that Palantir is already valued at a market cap of $55 billion.
Growth in commercial and government orders should drive Palantir's top line. In Q2, analysts expect commercial segment sales to rise by 32% year over year to $305.2 million, accounting for 47% of total sales, and offset uncertainty in the government business.
Is PLTR Stock a Good Buy Right Now?
Investment bank Citi (C) raised its target price for Palantir ahead of earnings from $25 to $28, as it expects the company to benefit from AI-related tailwinds.
Alternatively, Mizuho downgraded Palantir to “underperform” due to the company’s “low-quality” earnings beats and limited earnings visibility. Mizuho raised the stock price target for PLTR to $22, but warned about the lack of transparency in its commercial business segments.
According to Barchart’s Mark Hake, CFA, Palantir could end 2025 with a free cash flow of $975 million on sales of $3.25 billion, indicating a margin of 30%. Hake assumed Palantir would be valued at $78 billion if we assume a 1.25% free cash flow yield.
Out of the 15 analysts covering Palantir, three recommend “strong buy,” one recommends “moderate buy,” four recommend “hold,” one recommends “moderate sell,” and six recommend “strong sell,” for an overall rating of “hold.”
The average target price for PLTR stock is $22.53, not far from the stock's current price.
PLTR has gained close to 16.6% in the last 12 months. However, the ongoing weakness in the equity markets might send the tech stock spiraling downwards, given it trades at 65x forward earnings.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
