Traders Sell but Investors Still Win After Palantir's Earnings

Key Points

• Palantir stock is down over 11% in pre-market trading after a solid earnings report. 
• Traders reacted to slightly weaker guidance to take profit after running the stock up 8% before earnings. 
• The long-term thesis for PLTR stock remains solid, particularly for one Palantir bull.  

Palantir Technologies Inc. NYSE: PLTR delivered a solid earnings report, but you wouldn't know it if you looked at the share price. PLTR stock is down over 11% in pre-market trading. You could look at this as a reaction to weaker full-year guidance. But it's more likely that traders took some profit after the PLTR stock shot about 8% higher before the results were released. 

It's a reminder that Palantir continues to attract both traders and long-term investors. If you're in the latter category, the story hasn't changed. If anything, it's getting stronger. However, in the short term, PLTR stock continues to be an active trade, and that's reflected in the volatile price movement. 

Earnings Show Continued Year-Over-Year Growth 

Palantir delivered revenue of $634.34 million, 2.7% higher than the consensus forecast of $617.6 million and 20.7% higher than the $525.19 million the company posted in the same quarter in 2023. Earnings per share (EPS) of eight cents were in line with estimates, and the company posted GAAP EPS of four cents per share. That made it five consecutive quarters of GAAP profitability for Palantir.  

Heading into earnings, investors had concerns about slumping government revenue, which is a significant part of Palantir's revenue. However, growth in the government sector grew 16% to $335 million, significantly higher than the $322 million that was forecast.  

Commercial revenue also increased 27% to $299 million, which beat estimates of $292 million. Palantir also announced it closed 136 U.S. commercial deals in the quarter, up from 70 in the same quarter in 2023. This growth is a result of the company's boot camps, which allow customers to test-drive Palantir's AIP software.  

If there was one cautionary note, it was in the forward guidance. Palantir expects to deliver between $649 to $653 million in the coming quarter. Analysts are forecasting $653 million. Palantir forecasts revenue between $2.68 billion and $2.69 billion for the full year. Analysts were forecasting $2.71 billion.  

The Loudest Bull is Still Bullish 

Wedbush analyst Dan Ives has been bullish on Palantir for some time. The renowned tech sector analyst referred to the company as the "Lionel Messi" of artificial intelligence stocks. 

Citing "increased momentum" in Palantir's growth story, Ives had this say in an investor note following the company's earnings call: "We are laser focused on the AI story playing out with [Artificial Intelligence Platform] leading the way and Palantir delivered robust numbers on this front yet again...We believe any modest sell-off post-print is a golden buying opportunity for this pure play AI name."  

Ives reiterated his Outperform rating and $35 price target on PLTR stock.  

Investors Need to Choose Which Lane They're in With PLTR Stock 

If you have a long position in Palantir, there was nothing in the earnings report that should change your thesis. The report shows solid growth. This is a buyable dip, especially if the stock continues to move lower.  

However, PLTR stock is objectively overvalued. That makes it an attractive target for traders, and it appears to describe what's happening with PLTR stock. Traders bid the stock up with no intention of holding it through earnings unless the report blew away expectations. As solid as the report was, it gave traders the opportunity to pull some money out of the stock.