What happened
Shares of Palantir (PLTR -2.55%) slid by 13.6% in February, according to data from S&P Global Market Intelligence. The data-analytics company's stock lost ground following the publication of its fourth-quarter results and subsequent coverage from analysts.
Palantir released its quarterly results on Feb. 17, delivering revenue that came in ahead of the market's expectations but earnings that fell short of analysts' average prediction. The business posted non-GAAP (adjusted) earnings of $0.02 per share on revenue of $433 million, while the analysts' consensus had called for adjusted earnings of $0.04 per share on sales of $418 million.
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So what
Palantir's revenue climbed 34% year over year in Q4, with commercial revenue surging 47% and revenue from government customers climbing 26%. While revenues from U.S. commercial customers jumped an impressive 132% compared to the prior-year period, investors seemed to focus on the big growth deceleration among public-sector customers.
Palantir's revenue from government customers soared 77% in 2020, and in 2021's first quarter, it delivered a 76% revenue increase in the segment. But in each subsequent quarter, growth slowed substantially, and the market appears particularly fixated on the details of the segment's performance in Q4.
The big data specialist added just $8 million in new contract spending from government customers last quarter, by far the lowest that metric has been in Palantir's relatively short history as a public traded company. While government revenue still grew at a solid rate as spending ramped up from additional contracts, the scarcity of new deals in the segment highlighted concerns that investors have about the company's growth engine.
Now what
Palantir stock has continued to lose ground in March. Its share price is down roughly 7% in the month so far.
In conjunction with its Q4 release, Palantir also issued guidance for the current quarter and further down the line. Management expects the business to post $443 million in sales with an adjusted operating margin of 23% in Q1. The team also issued a target for an adjusted operating margin of 27% for the full year and reiterated its guidance for annual revenue growth of 30% or more through 2025.
Palantir now has a market capitalization of roughly $23 billion, and trades at approximately 56.7 times this year's expected adjusted earnings and 11.5 times expected sales. The company has a growth-dependent valuation and a somewhat speculative outlook, but recent sell-offs may have created a worthwhile entry point for investors who see long-term promise in its specialized data analytics services.
