Palantir (PLTR) Stock Drops as Analyst Sees Risk of Shares Falling Over 50% in 2022

December 20, 2021 7:06 AM EST
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Price: $9.43 --0%

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    4 Buy, 5 Hold, 4 Sell

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    Up: 8 | Down: 23 | New: 34
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Shares of Palantir Technologies (NYSE: PLTR) are down 3% in pre-open Monday after William Blair analyst Kamil Mielczarek weighed in negatively on the outlook for Palantir stock in 2022.

Mielczarek noted that Palantir did not win any significant “new work” U.S. government contracts in the September quarter. Palantir stock is down over 35% since September highs.

Even more concerning, the analyst sees a further downside in Palantir stock price in 2022 as William Blair’s tracker “suggests that the drought for U.S. government nonclassified contracts (roughly 35% of total revenue) has largely continued in the fourth quarter that is now nearly complete.”

“We think Palantir’s recent government struggles are a function of the continuing resolution, elevated competition, the lumpy nature of government contracts, the lack of new COVID-related work, and protracted procurement cycles for large contracts,” Mielczarek said in a client note.

Overall, the analyst projects that the U.S. government revenue growth has decelerated from 83% in the March quarter to 48% in the September quarter.

As a result, Mielczarek sees Palantir’s forward (2023) EV/sales multiple compressing to a range of 11-15 as sales plunge. This would translate into a Palantir stock trading between $12.00 to $16.00 in 2022.

“The primary risk is that Palantir does not significantly accelerate its commercial revenue. Palantir has struggled to achieve the same type of hypergrowth for its commercial division that many of its data analytics peers have achieved. The new sales strategy is showing potential, but we believe that it is too early to bet on. Government backlog has been approximately flat for the fifth consecutive quarter. We see risk that like several peers, Palantir could be negatively impacted by federal contracts slipping forward. In addition, Palantir won several COVID-19–related contracts over the last few quarters, which could become a headwind if the infection rates decline,” the analyst concluded.

Mielczarek rates Palantir stock as Underperform.

Palantir shares closed at $19.06 on Friday and are down 18.4% YTD.

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