Palantir Technologies (NYSE:PLTR) stock is under pressure and has eroded a significant portion of its shareholders’ wealth. Shares of this software company have declined by about 28% in three months and are trading near their 52-week low.
Investor sentiment continues to remain negative around Palantir stock. TipRanks’ Stock Investors tool shows that about 1.7% of investors who hold portfolios on TipRanks lowered their exposure to Palantir stock over the past month.
Palantir’s underperformance stems from the slowdown in its government revenue growth rate, which accounted for over 55% of its total revenues in Q3 of 2021. It’s worth noting that Palantir’s government revenues registered a growth rate of 76% in Q1 of this year. However, its growth has moderated since then.
Palantir’s government revenue growth rate decelerated to 66% in Q2 and 34% in Q3.
Besides the moderating government revenue growth rate, Palantir’s contribution margin has declined after peaking in Q4 of 2020.
Now What?
The slowdown in its key verticals and compression of margins have raised concerns, which is why the Wall Street analysts maintain a bearish outlook on Palantir stock. On TipRanks, Palantir sports a Moderate Sell consensus rating based on 1 Buy, 3 Holds, and 4 Sells.
Kamil Mielczarek of William Blair, who has a sell rating on Palantir stock, remains unimpressed with the company’s business model, which includes strategic investments to drive growth. Mielczarek doesn’t expect this model to sustain in the long run.
Nevertheless, Palantir added 34 net new customers in Q3 and closed 54 deals. Further, 18 of these deals were for at least $10 million, while 33 of these deals were for $5 million.
Besides customer growth, TipRanks’ Hedge Fund Trading Activity tool shows that hedge funds, including Cathie Wood’s ARK Investment Management, remain positive on Palantir stock. The data shows that hedge funds added 6.6 million Palantir shares in three months.
Meanwhile, Palantir’s stock forecast and price targets on TipRanks show decent upside. The average Palantir price target of $23.14 indicates 24.1% upside potential to current levels.
Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
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