Palantir ETFs Dip As Forecast Disappoints

Palantir Technologies Inc. shares tumbled more than 15% on Tuesday after the software company reported earnings that underwhelmed investors, dragging down ETFs that hold the stock.

Palantir shares are held in 127 U.S.-listed exchange-traded funds. The stock has the heaviest weight in the Global X Defense Tech ETF (SHLD), the Meet Kevin Pricing Power ETF (PP) and the ProShares Big Data Refiners ETF (DAT). Each of the funds have allocations of around 5% in the stock, and they were all down more than 1% midday Tuesday while major indexes like the S&P 500 rose. 

The firm reported adjusted earnings of $0.08 per share on revenues of $634 million for the first quarter, both ahead of analyst estimates.

However, Palantir’s updated guidance of $2.685 billion for full-year revenues was only a hair above the $2.68 billion that was expected, apparently disappointing investors who had wanted more.

Palantir is a popular stock among retail investors. Over the years, it’s gained a reputation for developing powerful software that helps governments track down criminals and terrorists.

The company has since widened its customer base to corporations in a push to fuel more growth.  

Those efforts have largely paid off. In Q1, revenues in Palantir’s commercial segment totaled $299 million, up 27% year-over-year, while growth in its government segment totaled $335 million, up 16%.

However, some investors may be betting that that growth is already factored into the stock. Shares of Palantir have tripled over the past year and they were last trading at 15x forward sales, one of the highest valuations among software stocks.

Mixed Views on Palantir

Nevertheless, Palantir remains well regarded among investors. Analyst views on the stock, however, are more mixed.

Wedbush analyst Daniel Ives called the pullback in Palantir stock a “golden buying opportunity.”  

“We are laser-focused on the AI story playing out with AIP leading the way and Palantir delivered robust numbers on this front yet again,” he said.

On the other hand, analyst Keith Weiss of Morgan Stanley, who has an underweight rating on the stock, noted that Palantir’s “valuation remains stretched tilting the risk-reward negative.”

William Blair’s Louie DiPalma, who is also negative on the stock, noted that “U.S. commercial revenue growth sharply decelerated last quarter,” disappointing investors who expected the company to better capitalize on A.I.