Contemplate Whether to Purchase or Offload Palantir Shares Prior to their Earnings Announcement?
Palantir Technologies (NASDAQ: PLTR) is set to announce its Q2 FY'25 earnings on August 4, and the tech giant's stock has a history of significant positive reactions to its earnings announcements.
Over the past 5 years, Palantir has reported 19 earnings data points, with approximately 53% of these occasions seeing positive one-day (1D) returns. This percentage rises to 58% when analyzing data from the last 3 years.
Historically, Palantir's stock has reacted positively when the company reports strong revenue growth and beats expectations. For instance, in 2025, Palantir saw its stock rise substantially following an earnings report showing a 39% year-over-year revenue increase to $884 million in Q1, driven by strong performance in both commercial and government sectors.
The company's robust earnings are a testament to its growing demand for AI and big data platforms, particularly in the U.S. In Q1, U.S. commercial revenue jumped 71%, while government revenue grew 45% to reach $373 million.
Revenues for Q2 FY'25 are projected to grow 38% year-over-year to $939 million. Consensus forecasts indicate earnings of $0.14 per share for Q2 FY'25, an increase from $0.09 a year earlier.
Palantir's earnings announcements are closely scrutinized for several key metrics, including revenue growth rates, guidance for subsequent quarters, and customer deal size and expansion. Positive surprises on these fronts typically lead to share price appreciation. Conversely, any slowdown or disappointing guidance can negatively impact the stock, given its valuation level and growth expectations.
Investors can approach analyzing the stock's post-earnings return in two ways: understanding the historical odds and positioning before the earnings release, or assessing the correlation between immediate and medium-term returns after earnings and positioning accordingly once the earnings are announced.
The correlation between 1D post-earnings returns and subsequent 5D returns (1D_5D) has been observed in Palantir's 5-year and 3-year history. If the 1D post-earnings return is positive, a trader could consider taking a "long" position for the next 5 days if the 1D post-earnings return is positive.
However, it's important to note that this correlation does not guarantee future results. The median of the 10 positive returns is 21%, and the median of the 9 negative returns is -13%. Therefore, a relatively less risky method involves understanding the correlation between short-term and medium-term returns following earnings.
Palantir currently has a market capitalization of $373 billion and is trading at high valuation multiples, with a forward P/E of approximately 270x. Despite this, the company's High Quality portfolio has surpassed the S&P 500 and achieved returns greater than 91% since its inception.
The Trefis RV strategy, which focuses on high-quality, high-growth companies, has also outperformed its all-cap stocks benchmark, delivering strong returns for investors.
In conclusion, while Palantir's stock is trading at high valuation multiples, its strong performance and growth potential make it an attractive investment for many. However, investors should closely monitor the company's earnings announcement and subsequent market reaction to make informed decisions.
[1] Source: CNN Business [2] Source: Seeking Alpha [3] Source: Yahoo Finance [4] Source: MarketWatch
- In light of Palantir's history of positive reactions to earnings announcements and strong revenue growth, it's crucial for investors to closely monitor the company's Q2 FY'25 earnings on August 4, as the technology firm's stock could potentially experience significant movements.
- As Palantir's earnings announcements are scrutinized for key metrics such as revenue growth rates and customer deals, a positive surprise on these fronts could lead to share price appreciation, making investing in this high-quality, high-growth company an attractive option, despite its high valuation multiples.
