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On Tuesday, Jefferies analyst Brent Thill reiterated an Underperform rating on Palantir Technologies Inc . (NASDAQ:PLTR) with a steady price target of $60.00. According to InvestingPro data, PLTR currently trades at a P/E ratio of 593x and appears overvalued based on its Fair Value estimate. The stock has shown remarkable momentum, gaining 63.65% year-to-date. Thill noted that Palantir delivered robust results in what is typically a weaker first quarter, with total and U.S. commercial year-over-year revenue growth accelerating to 39% and 71%, respectively. This performance is an increase from the 36% and 64% growth seen in the previous quarter. InvestingPro analysis reveals impressive gross margins of 80.25% and an overall financial health score rated as "GREAT," with 18 additional ProTips available to subscribers.
The company’s guidance was highlighted as particularly noteworthy, with revenue projections for calendar year 2025 (CY25) raised to more than six times the first-quarter beat. This guidance suggests a 36% year-over-year growth compared to the 29% anticipated for CY24, alongside a 44% operating margin and approximately 43.5% free cash flow margin. Despite these strong fundamentals, Thill expressed concern that Palantir’s current valuation, at 56 times CY26 revenue, presents a skewed risk/reward scenario.
Thill’s commentary also focused on several key areas to watch. The first is Palantir’s go-to-market (GTM) model. While acknowledging strong demand trends and execution, Thill remains skeptical about the company’s reliance on a service-led model and a limited sales force. He commended the product-led growth but questioned the reluctance to invest more in an enterprise sales model.
Another point of interest is the potential impact from government-related initiatives. Palantir has a significant government business, which accounts for 55% of its revenue mix, with the U.S. government business comprising 42%. The final area of concern Thill mentioned is international demand trends. Palantir’s international commercial revenue declined by 5% year-over-year and 11% quarter-over-quarter, with continued challenges in Europe. Given that Europe still represents approximately 11% of the company’s revenue as of CY24, Jefferies will be monitoring European technology and AI adoption trends closely. For deeper insights into Palantir’s valuation and growth metrics, investors can access the comprehensive Pro Research Report available exclusively on InvestingPro.
In other recent news, Palantir Technologies Inc. reported a significant revenue increase in its first-quarter fiscal year 2025 results, with total revenue reaching $883.9 million, a 39% year-over-year growth, surpassing the expected $862.2 million. This growth was driven largely by the U.S. commercial sector, which achieved a $1 billion annual run rate and a 71% year-over-year increase. The company’s U.S. Government revenue also saw a notable rise, increasing by 45% year-over-year to $373.0 million. Analysts have responded to these results with several firms adjusting their price targets for Palantir. Wedbush raised its price target to $140, citing Palantir’s strong growth trajectory and its position in the AI market. DA Davidson increased its target to $115, while Morgan Stanley (NYSE:MS) adjusted its target to $98, both recognizing the company’s robust performance. Additionally, Goldman Sachs raised its price target to $90, acknowledging Palantir’s potential for sustained growth but also noting potential long-term risks. In a strategic move, Palantir announced a partnership with xAI and TWG Global to enhance AI adoption in the financial services sector, aiming to drive market competitiveness and value creation.
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