Key Morningstar Metrics for Palantir Technologies
- Fair Value Estimate: $100
- Morningstar Rating: ★★★
- Morningstar Economic Moat Rating: Narrow
- Morningstar Uncertainty Rating: Very High
What We Thought of Palantir Technologies’s Earnings
Palantir PLTR shares are down 9% in after-hours trading despite the firm beating both management’s guidance and FactSet analyst expectations on revenue by 3%. Contribution margins, an efficiency metric, reached an all-time high of 61%. Revenue growth was 39% and adjusted operating margin was 44%.
Why it matters: Palantir continues to impressively penetrate the US government and commercial segments. That said, we believe we have reached a point where respectable earnings beats and raised guidance aren’t enough to materially move the stock to the upside.
- Palantir trades at 73 times revenue, nearly a 400% premium over other artificial intelligence software companies. We believe the premium multiple creates high expectations where management’s 4% guidance raise on 2025 revenue appears underwhelming.
- We believe Palantir justifies high expectations due in part to US commercial customers increasing 65% year over year. Not only are the customer counts increasing, but the size of deals is also increasing, as exhibited by a doubling of agreements worth more than $1 million.
The bottom line: We maintain our narrow moat rating and raise our fair value estimate by 11% to $100 per share, thanks to increasing demand from government and commercial customers for Palantir’s optimization software.
- We believe that the Department of Government Efficiency, the Golden Dome US missile defense system, and a potential $1 trillion-plus national security budget serve as tailwinds for Palantir’s growth in the coming years.
- Palantir is trading in 3-star territory, which indicates fair risk-adjusted return potential. If we see the stock move back into the $80 level, we believe upside potential would favor adding shares.
Between the lines: Palantir is blowing past the traditional Rule of 40 for software firms. This rule holds that a sum of revenue growth and operating margin above 40 is particularly strong. Palantir’s score of 83 shows an exemplary balance between market capture and efficiency.
