Stock market

As Palantir’s Share Price Falls, Is It Time to Buy AI Stock on the Cheap?

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Yesterday (May 6) may be a bank holiday here in the UK but across the pond the stock market was open. Moreover, the last few US companies have reported results as earnings season approaches. There was one that caught my eye. Palantir Technologies (NYSE:PLTR). Shares of Planter were down about 10% in after-hours trading. Is this a dip I should buy?

Details of results

On the face of it, Q1 results were pretty good. Revenue for the period came in at $634m, up 4% on the previous quarter and up 21% year-on-year. It recorded another profitable quarter, the sixth on the bounce.

Digging a little deeper, it is good to see that demand from both the public and private sectors is strong. Government revenue increased by 16 percent compared to the same time last year, while commercial revenue also increased by 27 percent. This is good because it means Palantir isn’t too dependent on just one customer segment to sell its software.

Unfortunately, investors looked past the good news and focused on the outlook for the rest of the year. The business is guiding for full-year revenue of $2.68bn-$2.69bn, below market expectations.

CEO Alex Karp points out that businesses need to convert more prospects into clients. He cited the 660 bootcamps held in the quarter, where firms can come and test the products and solutions that Palantir offers. He said that “They need results now. And we believe we have the only platform that works.

A high standard

Some investors may wonder why an exciting artificial intelligence (AI) stock that’s been growing in both revenue and profit should fall so much after earnings. Yet in reality, I’ve seen it happen before.

What has happened here is that investors have set an incredibly high ceiling for their expectations of how fast the business should grow. Then even if the expected guidance is good, people are disappointed if they don’t meet the high bar set.

You could argue that this is wishful thinking, but it’s not uncommon to see. The share price is not based solely on the value of the firm, but on what the future may hold. So investors who thought growth would be high will now have to adjust their expectations, causing the stock to fall in value in the short term.

Long term view

If we take a step back, I think Palantir is in pretty good shape. The big data analytics it provides is becoming more and more important to companies around the world. Further, the CEO mentioned that “Warfare will continue to be transformed by software in this century.” That’s true, and another reason I expect Palantir to move forward with government spending.

With all this in mind, I’m seriously thinking about buying some stocks soon, as I expect it to move back up in the long term.


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