Palantir Technologies‘ (PLTR) government business remains its chief growth driver, though it gained traction with commercial customers in the first quarter. Palantir stock would get a boost if commercial revenue growth picks up in the back half of 2021, analysts say.
Earnings for Denver-based Palantir, released after the market close on Tuesday, met views while revenue topped Wall Street targets.
Palantir’s government revenue rose 76% from the year-earlier period to $208 million. In the two previous quarters, government revenue climbed 85% and 68%.
Commercial revenue rose 19% to $133 million in the March quarter. In the two previous quarters, commercial revenue climbed 4% and 35%.
Government agencies use Palantir software for intelligence gathering, counterterrorism and military purposes. The software maker aims to expand into the health care, energy and manufacturing sectors. Given that Palantir stock trades at a high multiple of estimated 2022 revenue, more upside is needed in the commercial market, analysts say.
Palantir Stock: IBM Partnership Key To Commercial Market
“Coming into the Q1 print, the bigger investor debate revolves around the company’s ability to scale distribution and fit their technology into a broader set of customers, in particular commercial customers,” Morgan Stanley analyst Keith Weiss said in a report to clients.
Palantir stock fell 6.5% to close at 18.89 on the stock market today as the Nasdaq composite also tumbled.
Palantir recently forged a sales partnership with IBM (IBM). It has also added salespeople for the enterprise market. In the March quarter, Palantir added 11 new commercial customers, giving it 149 overall.
“While metrics disclosure and overall progress are encouraging, we continue to believe that a buildout of the commercial business will take time to execute,” especially outside the U.S., Jefferies analyst Brent Thill said in his note to clients.
Software Growth Stocks Struggle In 2021
Palantir earnings for the March quarter were 4 cents per adjusted share. Revenue jumped 49% to $341.2 million, the maker of data mining software said.
Palantir stock has swooned in 2021 amid a pullback in software growth stocks. Palantir stock need to form a new base to be actionable.
At RBC Capital Markets, analyst Matthew Hedberg said Palantir’s artificial intelligence tools will gain traction in the enterprise market. Palantir is one of many AI stocks to watch.
“The company continues to develop its offerings, with Edge AI generating pipeline in the company’s large government business, and we see that as likely to carry over to the commercial market as well,” he said in a note.
Palantir stock owns a Relative Strength Rating of 70 out of a best-possible 99.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.