Palantir's Earnings Preview: Will Wall Street Regret Its Bearish Stance?

You would almost think that Palantir (PLTR) wasn’t going to announce its earnings after the close on Monday.

We haven’t heard anything from Wall Street analysts. no change there, the analysts appear to hate Palantir’s stock.

Alex Karp, the company’s CEO has been quiet, though that’s protocol for any company ahead of their earnings release.

Not even the press is talking about it.

And that’s exactly what investors should want…

Wall Street Hates Palantir

For year, the company has been underestimated by Wall Street analysts for one reason, Palantir disappointed those same analysts in 2021 and they’ve never let it go.

In 2021, analysts and investors had an extremely bullish outlook for Palantir shares.  The stock was one of the newest offerings in the early AI Services industry.  That was the problem, the industry was in its infancy yet everyone’s expectations were sky high and unrealistic.

As a result, the company’s first series of disappointing earnings cause the stock to fall into a bear market, losing almost 90% of its value.  As a result, the company has been ostracized by Wall Street.

Currently, only 14% of the Wall Street analysts with a recommendation on Palantir have it ranked a “buy”.  Double that amount, 27%, have the stock a “hold” with the remaining 59% sitting on the fence as “holds”.

But being a bear has turned into a dangerous position on Palantir.

Palantir Bears are Getting Slaughtered

Palantir shares are trading more than 380% higher over the last year as the company is finally putting the results that Wall Street needed to see on the board.

The company spent the last two years lining up a strong pipeline contract business that is now generating revenue growth that makes even the largest of the large cap tech stocks jealous.

Of course, the size of current revenue is far smaller than those large cap tech companies.  But investors have shown a tendency to pay higher premiums for revenue growth lately as the Magnificent Seven revenues, while large, have slowed to their lowest growth since the Pandemic.

This, of course, strengthens Wall Street’s bears as they can point to high valuations as a reason to remain on the sidelines, but another positive quarter this afternoon may serve as the breaking point.

Palantir’s Earnings Potential

It’s as simple as this….

An earnings beat from Palantir on Monday afternoon will have Wall Street chasing this stock higher.

The current price target for Wall Street analysts sits at $53.42.  That price is 35% below today’s trading price for the stock.

We’ve already established that most analysts do not have a “buy” recommendation on the stock.

That would all change with even a small earning beat.

Shares are up 100% from last quarter’s earnings report and 230% higher over the last six months all because of the company’s fundamental performance.

This is the chart that best summarizes why Palantir’s stock is getting such a positive reaction to its earnings results. 

PLTR Earnings Summary Chart

Note the dramatic increase in the earnings per shares expectations AND actual results (blue and orange lines).

That trend represents the surge in Palantir’s fundamental revenue and earnings from its strong business pipeline.

Investors should note that the company’s government contract business continues to grow with strong ties to the new White House administration.

The bottom line is that the company has now built a strong trend of exceeding expectations after years of disappointing investors with their results.  The catch, those results two years ago were excessively high given the fact that the market was way ahead of the AI curve than the reality of companies like Palantir (PLTR), Bigbear.AI (BBAI) and SoundHound (SOUN), all AI Service companies that are now beginning to perform.

What to Expect from Palantir Post-Earnings

Shares of Palantir are trading at their all-time highs ahead of the report.

The stock has seen a sharp 24% healthy correction in the last month as Palantir traded from a high of $85 to technical support at its 50-day moving average during that correction.

That healthy correction puts Palantir stock in a position to surge another 15-15% higher should the company repeat last quarter’s “beat and raise” earnings results.

The kicker…. Such a report would also start to force the hand of those Wall Street bears to start upgrading both their outlook and price targets for the company looking forward.

Don’t think that a beat and raise is possible?

We got a sneak peek at some of the activity in the AI Services sector last week when IBM announced their results.  IBM is considered one of the original AI Service companies.

Shares of IBM shot higher by more than 15% and have held those gains.  The company’s earnings per share were $0.01 above their target with just 1% revenue growth over the last year.

The company’s outlook is what Palantir investors took note of as IBM indicated a strong growth cycle ahead for their AI Services business.

How to Position Ahead of Palantir’s Report

Buy and hold is the simplest and incredibly effect strategy for Palantir stock.

As I covered last week, Palantir shares is also a strong candidate for a “buy the dip” strategy.  Details of the target prices for that strategy can be found right here.

Palantir shares maintain a bullish outlook with a price target of $125.

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