Why Palantir Technologies Stock Tumbled on Wednesday
Key Points
Macroeconomic and geopolitical uncertainty pressured technology stocks, helping drag Palantir lower.
There have been a couple of positive developments in recent days.
The stock is still expensive by any measure, but its blistering growth suggests it might be worth it.
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Palantir Technologies (NASDAQ: PLTR) was under pressure today, with the stock falling as much as 5.8%. As of 11:55 a.m. ET, the stock was still down 4.1%.
The data mining and artificial intelligence (AI) specialist seemed to be caught in a broader downdraft in technology stocks, but the news surrounding Palantir was decidedly positive.
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A couple of big deals
After the market close on Friday, news broke that the Pentagon was poised to designate Palantir's Maven Smart System as an official "program of record," according to a report first featured by Reuters. This opens the door to widespread adoption across all branches of the U.S. military, locking in long-term use and funding.
In a letter to U.S. military commanders and Pentagon leaders, Deputy Secretary of Defense Steve Feinberg said Palantir's battlefield targeting and command-and-control system would provide warfighters "with the latest tools necessary to detect, deter, and dominate our adversaries in all domains."
Then, Palantir was awarded a contract by the U.K.'s Financial Conduct Authority (FCA) to help the watchdog agency investigate fraud, money laundering, and insider trading, according to a report by The Guardian. The three-month trial will involve data from more than 42,000 financial services firms in the country, including crypto exchanges and high-profile banks. A successful trial could lead to "full procurement" of Palantir's AI system, according to the report.
Taken together, these two developments help to underscore the unrelenting adoption of Palantir's AI tools by enterprises and government agencies.
At 245 times earnings, Palantir stock is certainly expensive, but its valuation shouldn't be viewed in a vacuum. In the fourth quarter, its revenue of $1.4 billion increased 70%, marking its 10th consecutive quarter of accelerating year-over-year growth. At the same time, its adjusted earnings per share (EPS) jumped 79% to $0.25. Rapid adoption of the company's Artificial Intelligence Platform (AIP) drove U.S. commercial revenue up 137% year over year and 28% quarter over quarter.
As I have argued before, Palantir may be the rare stock that can live up to its frothy valuation.
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Danny Vena, CPA has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
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