Palantir Technologies Inc (NYSE:PLTR) stock fell 7.22% (As on June 21, 11:30:14 AM UTC-4, Source: Google Finance) after Raymond James downgraded the company to Outperform from Strong Buy with a price target of $18, up from $15. The analyst cited the stock’s “premium” valuation after a strong run since its first-quarter print, but said they remain “enthusiastic about Palantir’s positioning in AI.”
The analyst added that the recent run in shares coupled with a premium valuation make finding a catalyst more challenging in the near term while the LT enthusiasm for AI and Palantir‘s positioning support the Outperform rating. On the other hand, William Blair analysts see a strong potential for a move lower in Palantir shares following the recent rally. The analysts believe the downside risk “has significantly increased. Investors may grow frustrated if Palantir’s revenue growth remains in the teens after the recent run-up. Palantir’s 80- times free cash flow multiple implies that Palantir will be able to reattain its 41% growth rate from 2021. The analyst expects long-term growth in the midteens. When Palantir’s valuation reverts to the same parameters used to value software peers, there could be greater than 50% downside.
Earlier this month, BofA Securities raised its price target on the stock, noting it believes the company has a unique position to take advantage of the rising AI opportunity.
Meanwhile, the company is taking steps across the company in recent months to refocus the efforts and optimize on the parts of the business that will drive even further growth alongside sustained profitability. In Q1 2023, the company has generated $525 million in revenue. Due to the seasonality of the business, Q1 tends to be the slowest quarter. But despite that headwind and the difficult macroeconomic environment that the technology industry continues to face, the commercial business generated $236 million of revenue last quarter and achieved $176 million in TCV, a 70% year-over-year TCV increase. These strong results were driven primarily by the reacceleration of the U.S. commercial business, which surpassed the $100 million revenue threshold for the first time, with 26% year-over-year growth.
The company has also signed significant expansion agreements with the largest health system in the country for continued acceleration of the hospital operations efforts and with one of the world’s largest paper and packaging companies. The U.S. commercial customer base, which stood at 155 at the end of Q1 2023, a sevenfold increase in customer count over just two years, presents an immense opportunity for continued expansion.