Commercial Initiatives Should Start Bearing Fruit Shortly, Says One Analyst

Palantir (PLTR) stock’s performance over the past 12 months looks pretty miserable, with shares down by 59%. Can the company’s upcoming earnings provide the necessary kick required for a meaningful turnaround?

That remains to be seen, although Jefferies’ Brent Thill believes the company’s expectations ahead of the print seem “reasonable.” Palantir has guided for revenue of $418 million, 30% above the haul generated during the same period last year although decelerating from the 40% growth shown in 4Q20.

Once again, Thill expects the government segment will be the “main driver of growth,” although importantly, Thill believes to a lesser extent than in previous quarters. Over the past few quarters, this segment’s growth has been declining with a particularly sharp drop to 34% in 3Q21, following +66% growth in 2Q21, +76% in 1Q21 and +85% in 4Q20. “We think that the government business will continue to be a consistent contributor to the top line but that much of the low-hanging fruit has already been picked,” the 5-star analyst opined.

Palantir’s reliance on big government contracts has often informed the bear case around the company and improving its position in the commercial sector is seen as vital for its long-term prospects.

As such, the fact the Commercial segment’s revenue growth has “begun to inflect” bodes well. And based on several initiatives put in place over the last few quarters which should begin to bear fruit – Thill highlights commercial partnerships, investments in the direct sales force, the SPAC investment program and product modularization – the analyst anticipates “further growth acceleration, particularly on the U.S. commercial side.”

Promisingly, the growth curve in this segment has been moving in the opposite direction to that of the government segment. Total commercial revenue growth increased by 38% year-over-year in 3Q21, following +28% in 2Q21, +20% in 1Q21 and +4% in 4Q20.

So, what does this all mean for investors? Thill rates PLTR stock a Buy while his $21 price target suggests shares have room for 61% growth in the year ahead. (To watch Thill’s track record, click here)

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Thill’s Buy rating is the lone positive review on the Street, and with the addition of 3 Holds and 4 Sells, the analyst consensus rates the stock a Moderate Sell. However, going by the $20.71 average price target, the Street appears to think shares are undervalued by 59%. Its will be interesting to see if the analysts end up reducing price targets or upgrading ratings, shortly. (See Palantir stock forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.