It’s time to sell Palantir as further risks lie ahead for the company’s government contracts business, Deutsche Bank says. “While we’ve always been more skeptical of Palantir’s commercial opportunity, our thesis was rooted in what we saw as a uniquely strong position in Public Sector,” wrote Brad Zelnick as he downgraded shares from a hold to a sell rating. “Now with the Gov’t business further decelerating off of easier compares and with diminished confidence/visibility ahead, we are left with very little to support our thesis.” The downgrade from Deutsche Bank comes after the company reported second-quarter results that beat revenue expectations but showed a loss per share . Along with the miss, the company cut its full-year guidance, citing the uncertain timing of some government contracts. According to Zelnick, Palantir’s aggressive spending campaign could spell trouble in the months ahead and he believes the company’s outlook for 2022 has not been “de-risked” to account for a potentially weakening commercial business. “We have always been skeptical around the LT economics of the business, and ultimately the extent to which Palantir is a true Software company vs. a highly skilled professional services firm with reusable IP,” he said. “The recent fact pattern only fuels our skepticism as we see profitability moving in the wrong direction. Along with the downgrade, the bank cut its revenue estimates for 2022 and 2023 and trimmed its price target on the stock to $8 from $11 a share. Palantir’s stock has plummeted 46% this year, with the new price target suggesting it could tumble another 18.5% from Monday’s close. — CNBC’s Michael Bloom contributed reporting
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