Shares of Palantir (PLTR) are under pressure on Wednesday after the maker of software and analytics tools for the defense industry and large corporations reported in-line earnings per share but better than expected revenue for the first quarter. While Goldman Sachs analyst Christopher Merwin was "encouraged" by the "noteworthy" quarter, his peer at Citi kept a Sell rating on the shares following what he called a "mixed" first quarter with a smaller than typical revenue beat.

RESULTS: On Tuesday, Palantir reported first-quarter adjusted earnings per share of 4c, in-line with the expected 4c, and revenue for the quarter of $341.23M, which topped the consensus forecast of $332.23M. The company reported first-quarter adjusted EBITDA of $119.82M, and adjusted free cash flow of $151M, up $441M year-over-year, and representing a 44% margin. Palantir also said U.S. commercial revenue grew 72% year-over-year and U.S. government revenue grew 83% year-over-year.

For the second quarter, the company sees revenue of $360M, with consensus at $344.31M, and adjusted operating margin of 23%. Additionally, Palantir said it sees a full-year 2021 adjusted free cash flow of over $150M and annual revenue growth of 30% or greater for 2021 through 2025.

'NOTEWORTHY' Q1: Following Palantir's quarterly results, Goldman Sachs analyst Christopher Merwin lowered his price target on the stock to $30 from $34, while keeping a Buy rating on the name. The analyst argued that the company reported a "noteworthy" first quarter as revenue growth accelerated to 49% from 40% in the fourth quarter, and cash adjusted free flow margins increased by 171 points year-over-year to 44%. The "strong" sales were mostly a result of the U.S. business as lingering pandemic headwinds weighed on international, the analyst added. Merwin is "encouraged" to see that the commercial business added 11 new customers in the quarter but his target drops due to comp group multiple compression.

Also keeping a Buy rating on the stock, Jefferies analyst Brent Thill lowered the firm's price target on Palantir Technologies to $28 from $40. The analyst highlighted that the company posted a first-quarter beat while guiding second-quarter revenue growth above Street estimates. However, as with others in growth software over the past few months, the stock's valuation is under pressure with the 2022 revenue multiple getting cut in half since February to 24 times today, Thill added. The analyst remains "positively biased" on Palantir's fundamentals but reduced his target multiple to account for multiple compression.

FULL VALUATION: More cautious on the name, Wolfe Research analyst Alex Zukin lowered the firm's price target on Palantir Technologies to $20 from $23 and kept a Peer Perform rating on the shares. The company delivered a strong quarter with accelerating revenue growth and unveiled long-term revenue guidance for over 30% growth over the next four years, Zukin acknowledged. However, a "full" valuation, limited history in the public markets, and volatility of the business model keeps the analyst on the sidelines.

Meanwhile, RBC Capital analyst Matthew Hedberg lowered his price target on Palantir to $20 from $27, keeping a Sector Perform rating on the shares after the company’s first quarter results. The analyst noted that Palantir saw a "solid" revenue outperformance and delivered a better-than-expected margin and cash flow. However, Hedberg believes a reduced price target is warranted by the comp group multiple compression.

MIXED QUARTER: Keeping a Sell rating on the shares, Citi analyst Tyler Radke raised the firm's price target on Palantir Technologies to $17 from $15. Palantir delivered a "mixed" first quarter with a smaller than typical revenue beat and reiterated annual/long-term guidance, Radke told investors in a research note of his own. While there were some more encouraging early indicators in commercial such as 11 net new customers, and strong U.S. performance, the analyst pointed out that overall commercial revenue growth of 20% "remains lackluster," and it could take time to improve.

Also commenting on the company's quarterly results, Morgan Stanley analyst Keith Weiss said improving commercial customer additions, accelerated sales hiring and building commercial pipelines are all ingredients that add up to more durable growth being ahead for Palantir. However, the views durable growth as "already well priced in" given the stock's current valuation and maintains an Underweight rating and $19 price target on the shares.

PRICE ACTION: In morning trading, shares of Palantir have dropped almost 7% to $18.90.