Palantir
reported
its
earnings
after
hours
on
May
6.
Here’s
what
our
analyst
thought
of
the
Q1
report.
We
maintain
our
$16
per
share
fair
value
estimate
for
narrow-moat
Palantir (PLTR) after
the
firm
kicked
off
fiscal
2024
with
a
set
of
strong
financial
results,
largely
in
line
with
our
prior
estimates.
Spearheading
these
results
was
continued
momentum
for
the
firm’s
artificial
intelligence
platform,
or
AIP,
a
trend
we
see
continuing,
especially
in
the
US
commercial
space.
Key
Morningstar
Metrics
for
Palantir
Stock
•
Fair
Value
Estimate:
$16
•
Morningstar
Rating:
2
stars
•
Morningstar
Economic
Moat
Rating:
Narrow
•
Morningstar
Uncertainty
Rating:
Very
High
What
We
Thought
of
Palantir’s
Earnings
While
we
model
robust
top-line
growth
and
margin
expansion
for
Palantir,
we
remain
unable
to
rationalize
the
market’s
current
valuation
on
the
name.
For
context,
our
top
line
and
profitability
estimates
for
the
upcoming
two
years
are
all
above
consensus,
highlighting
our
view
that
Palantir
stands
to
materially
benefit
from
increased
AI
spending
as
a
leader
in
the
AI
platform
space.
Despite
the
firm’s
shares
trading
down
after
hours,
we
continue
to
view
them
as
overvalued.
When
modelling
Palantir’s
growth
and
profitability,
we
also
looked
at
a
hypothetical
bull
case
in
which
the
firm’s
AIP
saw
robust
adoption
as
customers
new
and
old
flocked
to
use
Palantir’s
AI
solutions
to
power
their
businesses.
This
scenario
bakes
in
a
higher-for-longer
growth
outlook
for
Palantir’s
government
and
commercial
businesses,
resulting
in
a
$22
per
share
fair
value
estimate.
First-quarter
sales
reached
$634
million
(£505
million),
up
22%
year
on
year
and
up
4%
sequentially.
While
the
sales
number
was
shy
of
our
above-consensus
estimate,
we
were
impressed
by
Palantir’s
continued
traction
in
the
US
commercial
market.
Sales
from
this
segment
rose
40%
year
over
year
to
$150
million
as
Palantir
increased
its
US
commercial
customer
count
by
69%
year
over
year
to
262.
We
believe
strong
adoption
of
AIP
within
the
US
commercial
space
is
a
good
sign
for
Palantir
as
US
companies
are
often
early
adopters
when
it
comes
to
software,
with
other
global
markets
following
suit.
We
were
equally
impressed
by
the
firm’s
strong
forward-looking
metrics,
with
remaining
performance
obligations,
or
RPO,
up
strongly
year
over
year
and
outpacing
revenue
growth.
Palantir
Raises
Its
2024
Outlook
Along
with
strong
sales
growth,
Palantir
continued
to
expand
its
profitability,
with
first-quarter
adjusted
operating
margins
coming
in
at
36%,
up
from
24%
a
year
ago.
While
the
firm’s
focus
on
profitability
has
been
with
a
keen
eye
on
S&P
500
inclusion,
we
believe
the
marked
improvement
in
Palantir’s
margins
points
to
the
inherent
operating
leverage
built
into
moaty
software
businesses.
Over
the
past
few
quarters,
Palantir’s
net
retention,
a
measure
of
the
firm’s
ability
to
upsell
existing
customers,
has
slid
downwards
as
customer
expansion
has
become
difficult
due
to
tough
macroeconomic
conditions.
However,
with
strong
AIP
adoption,
we
are
seeing
a
turnaround
in
the
firm’s
net
retention
metric,
which
clocked
in
at
111%
in
the
first
quarter,
flat
year
over
year
and
up
from
108%
last
quarter.
Along
with
strong
quarterly
results,
Palantir
raised
its
outlook
for
2024.
The
firm’s
updated
guidance
calls
for
2024
sales
and
adjusted
operating
income
of
$2.68
billion
and
$874
million,
both
at
the
midpoint
of
guidance,
up
from
$2.66
billion
and
$842
million
previously.
With
three
quarters
of
the
year
left
to
go,
we
view
these
revised
estimates
as
conservative
and
are
modelling
Palantir
to
maintain
its
track
record
of
exceeding
its
guidance
on
both
fronts.
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