Palantir earnings for the fourth quarter, outlook will test the 2023 rally

shares in Palantir Technologies (PLTR) rebounded in early 2023. However, some analysts are still cautious on the prospects for PLTR stock amid hurdles at the software maker’s government and commercial firms.

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Palantir’s fourth-quarter results are due on February 13 after the market close. Analysts estimate a profit of 3 cents, one cent more than last year. Revenue is expected to increase 16% to $502.6 million.

Analysts are expecting revenue growth of around 21% for the government sector of PLTR stock. Analysts are forecasting fourth-quarter commercial revenue growth of about 11% for Palantir stock.

“Palantir has made progress in expanding its commercial footprint; however, we expect the current environment to limit growth,” said Brian White, analyst at Monness, Crespi, Hardt, in a report. “In government, the closing of deals has proven to be fickle, leading to blanket revenue recognition.”

Palantir stock is up 17% in 2023. However, PLTR stock is down 46% year over year and 67% since the start of a sell-off in software stocks in November 2021.

“We believe expectations are achievable but remain cautious that another reset may be coming,” Jefferies analyst Brent Thill said in a note to clients Monday.

“Sentiment over the story remains negative as the key debate shifts to whether the commercial business can be accelerated without input from SPACs after management acknowledged these investments were a mistake,” Thill continued. “We believe the slowdown in government business is likely to continue until activity for new deals resumes.”

PLTR Stock: Looking for Growth Opportunities

Palantir is one of several software stocks with double-digit gains in early 2023.

“Despite the recent re-rating of shares, the risk of the incremental estimate may not yet be fully priced in – headwinds in the commercial business, leaving year-end sales growth in the teens, are adding a negative risk/reward bias to results, according to our estimates of the fourth quarter,” said Keith Weiss, analyst at Morgan Stanley, in his note to clients.

Palantir generates nearly 60% of revenue from government agencies that use Palantir software for intelligence gathering, counter-terrorism, and military purposes. Additionally, PLTR stock aims to grow its commercial business. The software maker plans to expand into healthcare, energy and manufacturing.

Shyam Sankar, Palantir’s Chief Operating Officer, recently spoke to Investor’s Business Daily about the enterprise software market.

“I think 2023 is going to be a very interesting year for the competitive landscape in the data industry, especially as I think a major global recession is imminent if not already,” he said.

“And I think there’s going to be a big shift where people are looking for software that can be implemented quickly, that gets results very quickly, and move away from a little more mimetics.”

Palantir’s SPAC strategy

Meanwhile, on Jan. 18, Mizuho Securities began coverage of Palantir stock with a neutral rating.

“Growth in both government and commercial businesses has slowed significantly, and an uncertain macro environment makes a meaningful near-term reacceleration much more difficult,” Mizuho analyst Matthew Broome said in a note.

Some analysts have criticized PLTR’s strategic investments in Special Purpose Acquisition Companies, or SPACs, to boost revenue. SPACs raise money in an IPO for the purpose of making acquisitions.

In addition, the SPACs enter into multi-year agreements to use Palantir software in their core business.

Also, PLTR stock has a relative strength rating of 25 out of the best possible 99, according to IBD inventory check.

Follow Reinhard Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

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