Palantir Shares Slip DespiteRaised Price Targetfrom RBC Capital Analyst

Palantir's stock price fell despite beating revenue projections in its first-quarter earnings report. RBC Capital analyst Rishi Jaluria raised the price target to $9 but maintained an underperform recommendation, citing concerns over the company's growth and margins.

Bijay Laxmi
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Palantir Shares Slip DespiteRaised Price Targetfrom RBC Capital Analyst

Palantir Shares Slip DespiteRaised Price Targetfrom RBC Capital Analyst

Shares of Palantir Technologies (NYSE: PLTR) have taken a hit following the company's first-quarter earnings report, despite an increase in the price target from RBC Capital analyst Rishi Jaluria. The data analytics firm saw its stock price tumble even as it beat revenue projections for the quarter.

Jaluria raised his price target for Palantir from $5 to $9 per share, representing a 33% increase. However, he maintained an underperform recommendation on the stock, citing concerns over the sustainability of the company's growth and margins. Specifically, Jaluria pointed to Palantir's reliance on revenue from special purpose acquisition companies (SPACs) as a potential risk factor.

Why this matters: The scrutiny of Palantir's revenue streams has implications for the broader technology sector, as investors become increasingly cautious about companies with unsustainable growth models. As the market watches Palantir's performance, it may lead to a reevaluation of other companies with similar revenue structures, potentially impacting the overallmarket sentiment.

In a note to clients, Jaluria described Palantir's quarterly results as "decent" but expressed reservations about the company's commercial segment growth being driven by SPAC revenue. "Our concerns on the sustainability of growth/margins are unchanged," he wrote. "We see the risk-reward skewed negatively with shares trading at a premium multiple."

The Wall Street Journal reported that some of the companies receiving investments from Palantir simultaneously signed contracts with the firm, raising questions about the long-term viability of this revenue stream. Many of these SPAC-backed businesses are not performing well, further compounding the concerns.

Despite these challenges, Palantir maintains a thriving business with the public sector, which tends to provide a reliable and lucrative source of revenue. The company's work with government agencies has been a key driver of growth and could help offset any potential slowdown in commercial segment performance.

Palantir's first-quarter earnings report showed double-digit growth in both revenue and earnings, surpassing the average analyst revenue prediction. However, the company's share price still declined in the aftermath of the release, reflecting investor concerns about the sustainability of its growth trajectory. As Palantir navigates the challenges posed by its SPAC investments and works to diversify its revenue streams, the market will be closely watching to see if the company can maintain its momentum in the face of these headwinds.