Have you bought Palantir Stock yet?

Palantir‘s (PLTR -6.37% ) the stock fell 16% to a 52-week low in Feb. 17 after the company posted its fourth quarter results.

The data analytics company’s revenue rose 34% annually to $ 433 million, beating analysts ’expectations of $ 15 million. But its net losses widened from $ 148 million to $ 156 million on a generally accepted accounting principles (GAAP) basis, while its non -GAAP revenues of $ 0.02 per share exceeded the consensus estimate by two cents.

Should investors buy some portion of this former high-flying stock-which has dropped nearly 70% since hitting a record high of $ 39 in January-or should they avoid it? Let’s dig deeper to find out.

How fast is Palantir growing?

Palantir operates two main platforms: Gotham for government agencies and Foundry for business clients. The two platforms combine data from different sources to help clients make data-based decisions.

In 2021, Palantir generated 57% of its revenue from government clients and 41% of its revenue from commercial clients. Here’s how fast those two major businesses grew in 2020 and throughout 2021:

Data source: Palantir. YOY = Year-over-year.

When Palantir went public via direct listing in September. 2020, critics say it will find it difficult to expand its commercial business to reduce its dependence on tight U.S. government contracts.

However, Palantir’s commercial business growth will actually accelerate throughout 2021 as it signs more deals with domestic customers. For the full year, its U.S. commercial revenues rose 102% and offset the gradual slowdown in its government business.

Palantir expects its revenue to increase by 30% annually in the first quarter of 2022, which exceeds analysts ’expectations for 29% growth. It also reiterated its long -term goal to increase its revenues by at least 30% per year until 2025. Analysts expect its revenues to increase by 32% to $ 2 billion by 2021.

But can Palantir earn?

Palantir’s commercial business continues to expand as its government business generates steady growth, but there is still much doubt about its ability to break on the GAAP basis.

But beyond Palantir’s fixed gross and operating margins-which do not include stock-based compensation costs, employer-related taxes, and other one-time charges-we can see that the its gross margins in GAAP. Its GAAP operating margins, while negative, also continue to flow towards the breakeven point:

Source: Palantir.

However, Palantir still expects its adjusted operating margin to decline to 23% in the first quarter of 2022 and 27% for the full year as it increases its investments. It did not provide insight for its GAAP margins.

It may still take years for Palantir to achieve a full year profit, but analysts expect its net loss on GAAP to drop from $ 520 million in 2021 to $ 205 million in 2022. That growth is encouraging, but all that red ink also leaves Palantir highly exposed to inflation and rising inflation rates.

Its values ​​are still an issue

Palantir stock is still trading at about 12 times in sales this year after its earnings fell. That valuation may seem reasonable for a company that generates more than 30% growth per year, but it’s easy to find more fundamentally stable stocks at comparable valuations – as well as cheaper stocks with similar revenue growth rates.

Service Today ( NOW -1.72% ), which expects to grow its annual revenue at a compound annual growth rate (CAGR) of 21% between 2021 to 2026, may seem more expensive than Palantir at 15 times sales this year. But, it totally pays off both GAAP and non -GAAP measures.

C3.ai (AI -5.15% ), which is expected to increase its revenue by 35% -37% this fiscal year (which ends this April), is trading at just nine times the estimate. Like Palantir, C3.ai provides AI and data-crunching tools for government and enterprise customers. It is also not profitable on the basis of GAAP.

Based on these comparisons, Palantir stock may have limited upside potential. They also suggest that its rally last year was more driven by market hype rather than its actual growth.

Should you buy Palantir now?

I bought Palantir for under $ 10 shortly after its direct listing, I sold part of my shares in mid-January $ 30, and sold the rest to high-teens earlier this year. I still admire the business, but its valuations and the current market climate suggest it would be smarter to sell the stock and review it later.

I’m still optimistic about Palantir’s long-term prospects, but I think the stock could sink further until its price-to-sales ratio reaches single digit highs. When that happens, I will consider starting a new position at Palantir again.

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