When a company’s CEO is frustrated, it’s probably not a good sign for investors. Today’s example is Palantir Technologies (NYSE:PLTR) stock, which seems to have difficulty with some government contracts as their timing can be problematic.
Additionally, Palantir’s disappointing forecast could easily be a deal breaker for potential PLTR stock investors.
Don’t get the wrong message here. Palantir Technologies seemed to hold a lot of promise at one point. The company, which offers data analytics tools to government entities as well as commercial customers, looked like a surefire winner in the digital age.
Lately, however, some people are starting to poke holes in Palantir’s bullish thesis. They worry about whether the company is too dependent on government subsidies. Perhaps Palantir Technologies’ business model is far from ideal, and Palantir’s own projections point to a company that is certainly not in growth mode.
What’s going on with PLTR shares?
From hyped to awful, PLTR is the poster child for the pop-and-drops of the early 2020s. $8 recently.
Really, those stocks were never worth $40 or even $20. Sometimes traders go into euphoria mode when looking for the next meme stock. They probably never thought that Palantir, with its overreliance on government contracts, might run into serious trouble.
We’re not revealing any secrets here, as Palantir’s own CEO, Alex Karp, has acknowledged the challenges of depending on government rewards. By Karp’s own admission, the US government “owns some of our biggest contracts, and they were expelled.”
“Postponed” could mean a delay, or even a costly cancellation. “Sometimes they are put off. Sometimes it takes us too long to get them,” Karp said.
The CEO called the uncertainty surrounding Palantir’s government contracts “frustrating.” Undoubtedly, many of the company’s long-term stakeholders are also very frustrated.
Soft Guidance casts a shadow over Palantir Technologies
Could these “postponed” government contracts impact Palantir’s early results? It certainly can, and the company’s own guidance suggests that Palantir Technologies may be setting its stakeholders up for financial trouble.
Before we dive deeper into that, it’s worth noting that Palantir has a growing profitability gap. During the second quarter of 2022, Palantir Technologies completed an investment of $179.33 million loss of net income. That’s certainly worse than the $138.58 million loss in the year-ago quarter.
What seemed to bother the trading community the most, however, was Palantir’s weak third-quarter revenue forecast. Apparently, the company is forecasting current-quarter revenue of $474-475 million, while analysts consensus estimate claimed $500 million.
Understandably, some analysts cut their price targets on PLTR shares after observing Palantir’s weak earnings and unambitious revenue expectations. Deutsche Bank’s Brad Zelnick dropped from $11 to $8, with a “sell” rating. Citigroup analyst Tyler Radke rose from $7 to $6, with a “sell” rating, and Morgan Stanley analyst Keith Weiss rose from $13 to $11, with a rating of “equal weight”.
The Verdict: PLTR Stock Is Banned
The CEO’s frustration should not reassure the struggling shareholders of Palantir Technologies. As several analysts cut their price targets on PLTR shares, hopes for a turnaround are only dwindling.
It’s such a shame that a tech company that came to Wall Street with such high hopes is disappointing so many stakeholders now. So, as Palantir’s government contracts get “pushed back” and the company’s financial hole gets worse, it’s perfectly normal to find another company to bet on.
As of the date of publication, neither Louis Navellier nor the member of the InvestorPlace research staff principally responsible for this article holds (directly or indirectly) any position in the securities mentioned in this article.