A hét részvénye: Palantir Technologies (Angol hír)

• Share price of Palantir Technologies had a wild ride in recent months

• Stock jumped 50% and erased all of the gains later on

• Business is improving, company shows ability to generate cash

• Q1 earnings release scheduled for Monday, May 9

• Market expects Commercial segment growth to continue to outpace Government segment growth

• Stock pulled back to $10.50 support zone

Stock of Palantir Technologies (PLTR.US) has had a wild ride since the beginning of the Russian invasion of Ukraine. Stock jumped 50% between February 24 and April 4 before erasing all of those gains over the next month. Let's take a closer look at recent news on the company as well as expectations ahead of the upcoming earnings release.

Puzzling share price drop

Palantir is among traders' favorites thanks to a very high volatility its stock is experiencing. The past 2-3 months picture this volatility perfectly - stock rallied 50% in slightly over a month following launch of Russian invasion of Ukraine and erased all of this gains over the next month. The rally should not come as a surprise - more than half of Palantir revenue comes from government contracts, including Department of Defense contracts whose spending is expected to jump following the launch of war in Eastern Europe. However, a subsequent drop is puzzling. There was not any negative news that could justify the drop. In fact, it was the opposite - Palantir launched its first satellite that will allow it to process data in orbit, without a need to send it to Earth for processing. Moreover, the company unveiled a new line of products for data processing.

Business improvement overlooked?

Palantir Technologies is considered a high-growth stock with promising prospects ahead. However, what the market does not seem to realize is that the company has already made a big progress towards being a mature, self-sustained company. Palantir no longer burns cash, it has managed to report a $321.2 million in positive free cash flow in full-2021 along with a 41% growth in sales.

High share of revenue from government contracts in total revenue was always a concern when it comes to Palantir. While there is nothing wrong with taking on government contracts, such a high revenue concentration with a single customer is never desired. Palantir tries to boost share of the Commercial segment in total revenue but so far it has failed to achieve major progress in this field. Share of the Commercial segment remained unchanged near 45% in recent quarters. However, the company reported that the number of its commercial business customers increased by more than 200% throughout full-2021, which is a good omen for the segment going forward and is expected by analysts to continue in 2022 as well. Growth in Commercial segment revenue kept accelerating throughout 2021 while growth in Government revenue decelerated.

Palantir's Commercial segment growth outpaced Government segment growth in the second half of 2021. Source: Bloomberg, XTB

Q1 results preview

Expectations of a solid start to 2022 for Palantir's Commercial segment will be put to the test early next week. Palantir Technologies is scheduled to report earnings for the first quarter of 2022 on Monday, May 9 ahead of the Wall Street session open. Market expects another quarter of solid growth, although it is expected to be slower than 34.4% YoY reported in Q4 2021. If expectations are confirmed and revenue grows at a pace of 30% YoY it would be in-line with company long-term guidance of 30% sales growth until 2025. Commercial revenue growth is expected at around 43%, what would mark a small deceleration compared to Q4 2021. Nevertheless, it would still be significantly faster than 20% expected for the Government segment. However, what may be even more important than revenue is free cash flow. If a company shows a positive free cash flow, a bullish case would strengthen as the company will show another proof that it is able to generate cash, not only spend it.

Q1 market expectations:

• Revenue: $442.8 million expected (+29.8% YoY)

• Adjusted EPS: $0.034 expected (-14.6% YoY)

• Net Income: $89.87 million expected (+8.7% YoY)

A look at the chart

Taking a look at the recent stock performance of Palantir shares (PLTR.US), we can see that the upward move launched after the beginning of the Russian invasion of Ukraine was halted at the $14.50 resistance zone. Subsequent pullback was halted in the $10.50 area, defining short-term trading range as $10.50-14.50. Stock has been trading sideways near the lower limit of this range in recent days, hinting that sellers may have run out of steam. There is a high chance that the stock will remain relatively muted until earnings release on Monday provides more food for thought. A near-term resistance to watch can be found at the upper limit of the range - $14.50 area. However, even a break above this hurdle would not snap a downtrend form a technical point of view. A break above a key resistance in the $21.50 area, marked with the upper limit of Overbalance structure would be required for a trend reversal.

Source: xStation5