Technologies stock surged early Tuesday. But a quarterly update from the data-analytics software company was probably not the real reason, with comments from the CEO about growing M&A interest more likely to have piqued investors’ interest.
Yes it posted its first-ever profitable quarter on a GAAP basis, but CEO Alex Karp also suggested that the company is attracting growing acquisition interest.
“I think there’s going to be a lot of interest in us in buying our software and potentially in buying us,” Karp told analysts on a call after Palantir (ticker: PLTR) reported its earnings on Monday. “But we are pretty focused on our product, which is us.”
Karp also told CNBC that there is “growing M&A interest” in
the news channel reported after the market closed on Monday.
Palantir shares were up 19% at $9.04 in premarket trading on Tuesday. The stock is down 42% over the last 12 months.
Analysts at investment William Blair said in a research note that speculation over an acquisition was likely driving the share move, as the company’s fourth-quarter earnings were mixed.
And here’s what they mean. Palantir said it is set to be profitable on a GAAP basis for 2023, but its first-quarter revenue guidance was short of Wall Street consensus. Fourth-quarter net income of $31 million was helped by a one-time benefit from the consolidation of a Japanese joint venture.
Analysts at RBC Capital Markets, led by Rishi Jaluria, said Palantir reported weak top line fourth quarter and calendar year 2023 guidance, “though not de-risked (assumes accelerating growth), somewhat offset by better than expected profits.” RBC kept an Underperform rating on the stock.
Analysts at Mizuho Securities also said Palantir’s revenue remains volatile, as it is typically driven by large enterprise and government deals. They kept a Neutral rating on the stock but raised their target price to $8.00 from $7.00, based on the typical sales multiples for other Software-as-a-Service companies.
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