Palantir Tests Investors Patience, But May Still Pay Off Over Time PLTR stock is down sharply after earnings per share came in lower than expected. But risk-tolerant investors who are committed to hold the stock, still have a good chance at...

The latest earnings report confirms that PLTR stock is a buy for only the most patient investors

Palantir (NYSE:PLTR) picked the wrong day to disappoint on earnings. PLTR stock is down over 11% after the big data company's earnings per share came in lower than expected. This was more than enough to offset higher revenue. Investors don't need much reason to sell, and the EPS miss, even by one penny, was enough to spark the sell-off.

The reaction to Palantir earnings has surprised me all year. It's one of the few companies to which investors have decided that fundamentals matter. And so, despite a year-over-year revenue gain of 34% and revenue gains of 10% in each of the last two quarters, the stock continues to drop.

However, once analysts begin to digest the earnings report, we believe they'll see that the sharp sell-off was unwarranted. That doesn't mean Palantir is going to soar back to anywhere near its 52-week high anytime soon. But risk-tolerant investors who are committed to hold the stock, have a good chance at being rewarded.

Not a Linear Progression

The easy narrative is to say that PLTR stock has been a losing investment for the entirety of the last 12 months. But that's not entirely true. Shares of Palantir were in a bearish pattern from January through May. However, the stock then had a nice recovery and investors were in the green for the year around the end of September.

All that is to say that for a stock that's down over 50% in the last 12 months, Palantir has bounced around quite a bit. And there's reason for that. The company operates in the area of big data. This is a crowded field for sure. But it's not going away. And once a company gains a client, those clients tend to stay with the platform.

Perception is Reality

There are multiple criticisms that resurface about Palantir. One such criticism is that the company is not yet profitable. I agree that is not an insignificant concern. But it hasn't been a concern for many other stocks that generate far less revenue than Palantir.

Another concern is that Palantir relies on one customer, in this case the U.S. government, for too much of its business. I can sympathize with this concern as well. But again, Palantir continues to grow its revenue. And not all of that revenue is coming from the U.S. government. In fact, in the prior quarter, the company posted a 37% growth on the commercial side of the business.

Furthermore, revenue is projected to increase by an average of approximately 31% for the next five years. And earning are expected to grow at an even faster pace, averaging 45.5 percent. If you believe those numbers are accurate, it makes the company's forward price-to-earnings (P/E) ratio of 59.59% a bit more digestible.

A third criticism of Palantir's business model is the executive compensation model. In 2021, this led to an uncomfortable amount of insider selling. In many cases, this was about executives exercising options. If the volume of insider selling continues in 2022, it may be more of a cause for concern.

Is PLTR Stock a Buy?

Palantir has only been a publicly traded company since October 2020. That was a time that saw a lot of companies, many with no revenue or profits, come onto the scene. Comparatively, Palantir is a mature company that is having to fight for new customers both in the United States and also in Europe. And earnings are likely to remain under pressure as the company's margins will go as they increase their sales staff.

If you are an investor who has an appropriate commitment towards a long-term, buy-and-hold strategy, there may be a place for PLTR stock in that basket of stocks. But if you're an investor looking for a moonshot, there are other places to look.