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Why Palantir Technologies Stock Is Falling Today

By Lou Whiteman - Feb 16, 2021 at 10:33AM

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After the stock's impressive run-up, some investors are taking their gains and moving to the sidelines.

What happened

Shares of Palantir Technologies (PLTR 5.86%) fell as much as 10% on Tuesday after the company released fourth-quarter results and provided guidance for the years to come. The company is forecasting dramatic growth in 2021, but much of that is arguably already priced into the shares.

So what

Before markets opened on Tuesday, Palantir said it lost $0.08 per share in the fourth quarter on revenue of $322 million. The earnings fell short of Wall Street's $0.02 per-share profit estimate, but the revenue beat by about $22 million.

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The earnings miss was at least partially due to accounting for stock compensation expenses, but Palantir is bullish about its future. Full-year revenue came in at $1.1 billion, up 47% compared to 2019, and the company said it expects 2021 year-over-year sales growth "greater than 30%."

Palantir is targeting $4 billion in revenue by 2025.

The company provides data analytics tools to government and commercial customers. The government sector accounted for $190 million of Palantir's $322 million in fourth-quarter revenue and was the faster growing of the two segments on a year-over-year basis.

Now what

Overall, there was a lot of positives in the quarter -- but not enough to sate investor expectations.

Since going public in late September, Palantir has seen its shares climb by more than 200%, and the company currently trades at more than 40 times its projected 2021 sales figure. That's very expensive compared to other government IT providers, which tend to trade below two times sales. Compared to commercial vendors, the valuation is a little easier to justify. However, as noted previously, Palantir's government business remains an important part of the equation.

The post-public offering lockup that restricted the ability of insiders to sell is set to expire this week, so there could be a flood of new shares on the market soon. On Tuesday, investors are taking their gains instead of waiting to see if Palantir is able to grow into its valuation.

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