Palantir shares trade well short of the $220 target a Motley Fool contributor set in August. Ahead of third-quarter earnings on Nov. 2, the contributor lists three results he wants to see: faster revenue growth, sales from AI sovereignty efforts, and a higher profit margin.
Palantir shares traded in a $190 to $198 range on Friday, roughly 11% to 16% below the $220 level that Motley Fool contributor Patrick Sanders predicted the stock would reach before the end of 2026. The company reports third-quarter earnings on Nov. 2. Sanders says Palantir needs to deliver three things to make a run at $220.
Revenue needs to top $2.3 billion
Second-quarter revenue jumped 93% year over year to $1.94 billion. U.S. commercial revenue climbed 149% to $764 million, while U.S. government revenue increased 90% to $809 million.
Management's third-quarter revenue guidance of approximately $2.16 billion implies sequential growth of roughly 12%, compared with about 19% in the second quarter. Sanders calls that guidance conservative. Palantir has consistently beaten its revenue guidance this year, and another quarter of 19% sequential growth would put revenue at approximately $2.3 billion.
AI sovereignty efforts need to produce sales
Sanders also wants fresh evidence that Palantir's AI sovereignty efforts are producing meaningful business. The market involves helping organizations maintain control over their data and AI operations, and it has been a primary focus of CEO Alex Karp in recent months.
Palantir has used client boot camps to demonstrate how its software can solve potential customers' operational problems, and its sovereignty-focused efforts offer another way to introduce organizations to those capabilities. Evidence in the Q3 report could include new contracts, larger customer commitments, or management detail on how sovereignty-related demand is contributing to growth.
Margins have to expand further
Profitability deserves scrutiny too, Sanders argues, starting with operating margin. Palantir reported an adjusted operating margin of 62% in the second quarter, up from 60% in the first quarter.
The analyst would like to see that figure above 62% in the third quarter. If revenue growth keeps accelerating while margins expand, it would strengthen the argument that Palantir will eventually justify its currently expensive valuation.
Sanders does not expect the stock to reach $220 this year simply because management delivers another good earnings report. In his view, Palantir needs to give investors a reason to raise their expectations.
Source: The Motley Fool
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