Palantir Technologies Pre-earnings Analysis

Palantir Technologies Pre-earnings Analysis

Chart done on hourly timeframe. Palantir investors are celebrating the company’s first profitable year after 2023 concluded with four consecutive positive net income quarters. Shares of the company are up more than 200% in the last 12 months, clearly reflecting their fundamental growth, but many are questioning their valuation as the company approaches its Q1 earnings report this year. PLTR is once again expected to post revenue growth and a positive net income of .04, up from last quarter’s .03 EPS. This is an easy target for them and we expect them to achieve it with the help of their involvement in artificial intelligence and military contracts. 

Looking at their valuation in particular, the company’s 50B market up is hard to justify, but if they maintain the double digit percentage revenue grow they’ve seen YoY for the last seven years, then they have a shot of justifying their valuation. For now, PLTR is bringing about 2.5 in annual revenue, we’d want to see that number closer to 5B for that valuation. Their price to earnings ratio of 249 is far too high, but the company just achieved profitability, so if they can grow that then they can correct the P/E towards the healthy 15-25 range. There are only two ways for the P/E to come down, either profitability comes up, or the stock price comes down. PLTR will need to impress on profitability in particular this quarter for that reason. 

Given their involvement in artificial intelligence, the company is likely to mention AI, which has been a bullish trigger term this quarter. So there’s a high probability of a positive earnings outcome, but it all depends on what the numbers look like and what the tone of the call is. 

Option chain analysis:

Palantir’s option chain that expires on May 17th 2024 (Mid month) currently reflects an implied volatility reading of 117%, which translates to about a $4.07 move from the underlying stock. The direction of that move will depend on the earnings results and call.