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Shares of technology company Palantir (NYSE: PLTR) fell more than 11% on November 7, 2022, after it announced Q3 results a day earlier. In Q3, it reported revenue of $478 million and adjusted earnings of $0.01 per share. Comparatively, analysts forecast revenue at $470.3 million and earnings at $0.02 per share.
In the year-ago period, Palantir reported revenue of $392 million and adjusted earnings of $0.04 per share. We can see PLTR stock fell on the back of its missed earnings in the September quarter.
The company forecasted revenue between $508 million and $510 million in Q4, compared to estimates of $502.68 million. Let’s see what impacted Palantir’s sales in the most recent quarter and what’s next for investors.
Palantir is a high-growth tech stock
Palantir builds and deploys software platforms for the intelligence community in the United States and other international markets. These tools assist organizations in counter-terrorism investigations and related operations.
The company offers the Palantir Gotham, a platform where users can identify patterns hidden within datasets helping users and analysts to respond to threats effectively. Another robust platform is the Palantir Foundry which aims to change the way organizations operate by creating a central system for data that can be integrated and analyzed in a single place.
In Q3 of 2022, Palantir increased sales by 22% year over year while revenue originating from the United States surged 31%. Its commercial customers in the U.S. increased top-line by 53% while government sales in the country grew 23%.
While the U.S. continues to drive sales for the company, its international revenue is lagging by a significant margin in Q3 of 2022.
Palantir went public a little over two years ago, and it increased sales by 47% year over year to $1.09 billion in 2020. Its government sales were up 77% at $610 million, while commercial sales grew 22% to $482 million that year. Last year, Palantir’s sales surged by another 41% to $1.54 billion. Here, government sales grew 47% to $897 million, while commercial sales were up 34% at $645 million.
If we break down the company’s revenue growth further, you will see that commercial business sales grew at a faster pace compared to the government business in the last six months of 2021, and this trend has continued in 2022 as well.
Palantir ended Q3 with a total contract value of $1.3 billion, which provides investors with significant visibility in terms of sales. Its customer count also surged by 66% year over year, while the customer count in the U.S. more than doubled to 132 by the end of Q3.
What next for PLTR stock price and investors?
Palantir’s growth of its commercial business is quite encouraging as it will diversify its revenue base and reduce long-term dependence on public sector contracts that can be quite rigid. On the flip side, analysts believe government agencies in the United States are developing proprietary tools which will reduce dependency on Palantir.
In its S-1 filing, Palantir claimed it aims to become the “default operating system for data across the U.S. government.”
Valued at a market cap of $14.5 billion, Palantir stock is trading 82% below all-time highs. Analysts tracking the company expect sales to rise by 22.5% to $1.9 billion in 2022 and by 24.8% to $2.36 billion in 2023. Its adjusted earnings are forecast to rise by $0.13 per share in 2021 to $0.19 per share in 2023.
PLTR stock is priced at 6.14x forward sales and 37x forward earnings, which is still quite steep. Despite the lofty valuation, Palantir is trading at a discount of almost 30% compared to consensus price target estimates.