Palantir Share Price Forecast February 2022 – Time to Buy PLTR?

Shares of American software company Palantir (NYSE: PLTR) are in the red today, after closing at $11.02 as of February 18^th (19:59 EST). Palantir shares have declined almost 70% since they hit a record high of $39 in January. Many investors think that this presents a buying opportunity.

Palantir – Technical Analysis

Palantir’s financial statement indicates a market cap of $22.093 billion with total assets worth $3.247 billion. The company’s revenue for 2021 was at $1.54 billion. This was with a profit margin of -33.75% compared to $1.09 billion in 2020. According to its fourth-quarter results, Palantir’s revenue increased by 34% year over year to $433 million, which beat analysts’ expectations by $15 million. However, net loss also increased from $148 million to $156 million. This is on a generally accepted accounting principles (GAAP) basis.

Moving averages such as Exponential Moving Average (10)(12.85), Simple Moving Average (10)(13.09),  Exponential Moving Average (20)(13.46),  Simple Moving Average (20)(13.09) and Exponential Moving Average (30)(14.17) are indicating a sell action.

Oscillators such as Relative Strength Index (14)(30.99),  Stochastic %K (14, 3, 3)(32.78), Commodity Channel Index (20)(−237.15), Average Directional Index (14)(32.49) and Awesome Oscillator(−1.52) are neutral.

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Recent Developments

Palantir has two platforms – Gotham for government agencies and Foundry for enterprise clients and both platforms aggregate data from disparate sources to help clients make data-driven decisions. The company’s software helps integrate an organization’s data from all sources. This allows users to identify trends, run analytics, and improve their decision-making processes.  It is driven by Artificial Intelligence.

In 2021, the company generated about 57% of its revenue from government clients and 41% of its revenue from commercial clients despite only debuting in the stock market through a direct listing in Sept. 2020.

Many critics claimed it would struggle to expand its commercial business to reduce its dependence on rigid U.S. government contracts. However, the company proved everyone wrong. Its growth accelerated throughout 2021 as it signed more deals with domestic customers, with commercial revenue increasing a whopping 102% which balanced out the gradual deceleration of its government business.

Management now expects a revenue increase of 30% year over year in the first quarter of 2022, which exceeds analysts’ expectations for 29% growth.

Palantir’s commercial business continues to expand while its government business generates stable growth. If we exclude Palantir’s adjusted gross and operating margins which exclude its stock-based compensation expenses, employer-related taxes, and other one-time charges, we can see that its GAAP margins are increasing.

Should You Buy PLTR shares?

Investors must be aware that Palantir shares are trading at about 12 times this year’s sales after its post-earnings plunge. This valuation seems reasonable for a company. While it is generating more than 30% growth each year, there are more fundamentally stable stocks at comparable valuations as well as cheaper stocks.

Such rich valuations also set a high bar for Palantir. This can often lead to sharp corrections on things like a less-than-perfect earnings report. Shareholders thus, do not have any room for error and no margin of safety and a lot of its future growth is also priced into the shares. This can lead to poor returns if the business needs time for its fundamentals to catch up.

While investors have reasons to be optimistic about Palantir’s long-term prospects, the stock could sink further until its price-to-sales ratio hits the high single digits. Considering this now is not the time to buy Palantir shares.

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