Palantir Technologies Inc. shares are up nearly 50% from their May lows, but one analyst worries that “this strength will prove unsustainable.”
Monness, Crespi, Hardt & Co. analyst Brian White downgraded Palantir’s PLTR, -6.91% stock to neutral from buy Friday, pointing to concerns about how the software company and its stock will hold up in the current macroeconomic climate. The stock was off more than 6% in midday trading Friday.
“For next-gen software companies that are still trying to gain credibility with investors, the last several months have been harrowing, and the economic road ahead appears treacherous,” White wrote in his note to clients.
White likes Palantir’s opportunity to capitalize on trends like digital transformation and artificial intelligence, but has trouble squaring that with the economic backdrop.
“The geopolitical landscape became more perilous in 2022 and this chaos plays into the hands of Palantir, but at the same time, the global economy appears to be in a downward spiral, and we expect this will create headwinds for the company,” he wrote.
Further, he notes that investors have changed their priorities in the current market and are expected to “remain highly selective, focusing on the highest quality companies.”
Palantir is set to report quarterly results before the opening bell Aug. 8. White expects the company to “at least meet” his $459.4 million revenue estimate and 1-cent earnings-per-share forecast, though he said that “profits could be susceptible to the negative impact of nonoperating items, including unrealized losses from investments.”
While Palantir shares have bounced significantly off their recent lows, the stock is down 55% over the past 12 months, as the S&P 500 SPX, -1.37% has declined 9%.