Palantir Crushes Earnings in Q2. Is the Stock Heading Back to $200?
Key Points
Palantir beat expectations in Q2 and raised its guidance.
The stock's valuation is high, but the strong numbers may propel it higher anyway.
I don't know how Palantir Technologies (NASDAQ: PLTR) does it. When its growth rate reaches new heights, it somehow finds another lever to pull on and hits a new high. That's exactly what it did in the second quarter, as the company posted an astounding revenue figure nearly double what it posted a year ago.
All the key metrics were impressive for the company in the second quarter, as Palantir continues to dominate in artificial intelligence (AI) and be a trusted partner of the U.S. government. The results were strong, but don't forget, Palantir's stock is also expensive. It's been rallying since the numbers came out, but does it have enough to get back to $200? Let's take a look.
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Another beat-and-raise quarter for Palantir
Investor expectations are high for Palantir, and the company continues to meet and exceed them. In Q2, which went up until the end of June, its revenue totaled $1.9 billion, which was easily higher than analyst projections of $1.8 billion. It was up 93% year over year. Back in Q1, its revenue growth already looked incredible at 85%.
The company's adjusted per-share profit of 41 cents for this past quarter was also well above the 35 cents expected by analysts. In addition, it also raised its guidance, now expecting between $8.150 billion and $8.158 billion in revenue for the full year (its previous guidance was around $7.6 billion to $7.7 billion).
Maybe CEO Alex Karp is right when he says, "Forget consensus." At this point, the company is flying past the numbers and expectations. Wall Street may be setting the bar too low for the growth stock, or analysts are just struggling to keep up. Either way, Palantir is a business that has simply been unstoppable of late.
Can the stock get back to $200?
The stock has been jumping since the numbers came out, reaching levels it hasn't been at since January. It is still down around 8% for the year, but the Q2 numbers appear to have reenergized investors and perhaps have bearish ones thinking twice about the stock.
To reach $200, the stock would need to rise by around 24% from its current level. At more than 80 times its projected future earnings, it's pricey -- even if analysts may be underrating its growth.
I think it's possible for the stock to get back to those heights, given investor enthusiasm and its solid numbers, but a lot will also hinge on overall sentiment in the tech sector. It's been positive of late, given the recent round of earnings from tech giants, but if that changes, Palantir and other big AI stocks could fall. While the stock looks hot and $200 may be a possibility before the end of the year, this still isn't a risk-free stock by any means, and investors should keep that in mind before buying.
David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.