Palantir (NYSE:PLTR) is a company that I cannot find a better phrase to describe than the well-known “Houston, we have a problem.” PLTR stock made its debut in 2020 through a standard IPO and gained significant traction in early 2021. With a 52-week high price of $45, it has sold off that early traction in 2021 and now trades around $22.50.

Before we jump in, I’d like to do a small refresher on supporting arguments I’ve posited about PLTR stock in the past.

In my December 2020 article “3 Key Reasons to Avoid Palantir” I mentioned the following key points on my hesitancy for endorsing PLTR stock:

• Palantir’s valuation
• Palantir stock risks
• Palantir stock financial performance

I concluded that, “With only two fiscal years of full financial data, an argument in favor of buying Palantir stock seems unjustified as the revenue growth is solid, but fails to translate into profitability.”

Then in my January 2021 article, I mentioned not just one, but 10 reasons outlining risks in Palantir. A few of them were:

• Lockup period ends soon
• Risk of unsustainable revenue growth
• China business operations
• Commercial business competition
• Contracts with governments pose significant security risks
• Covid-19 outbreak

So with my previous thoughts outlined, how do I feel about the stock today? Has anything changed in the past six months?

PLTR Stock Became a Meme Stock

I may be misunderstood for what I am about to say, but there is a point for saying it. PLTR stock became wrapped into r/WallStreetBet’s trading wave that sent now infamous names GameStop (NYSE:GME) and AMC (NYSE:AMC) to incredibly unsustainable valuations at the beginning of 2021; stocks we now refer to as “meme stocks.” If I was the CEO of Palantir, or any other company for that matter, I would never want to be associated with meme stocks.

Why? A high stock value is good for my company.

It’s because it means I’m not doing my job by managing the company and delivering good financial results. Instead, social media has artificially supported my company and boosted its stock price off their own personal reasons. Since Palantir only went public last year, it’s an immature tech company with media buzz, and therefore, very susceptible to meme stock trading. Unfortunately that means a lot of its sentiment is speculative.

Q1 2021 Report: Strong but With a Big Problem

The first-quarter 2021 FORM 10-Q for Palantir showed one of the main problems the company must solve to gain any fundamental traction.

The good news is Palantir reported an increase in revenue and gross profit for the first three months of 2021 compared to the first quarter of 2020. But the good news ends there, as they also reported greater losses from operating activities and greater net losses.

The problem with Palantir is that it cannot yet turn revenue growth into net profitability.

According to CNBC “Palantir, the maker of software and analytics tools for the defense industry and large corporations, reported 49% revenue growth for its first quarter, beating Wall Street estimates. It also came in line with earnings estimates. Palantir said it expects to bring in $360 million in revenue in its second-quarter compared with the $344.3 million expected in a Refinitiv survey of analysts.”

Still, profitability is absent.

Bitcoin On the Balance Sheet?

In the same CNBC article, it was mentioned that Palantir, “was considering adding bitcoin to its balance sheet, saying the cryptocurrency was ‘definitely on the table.’ It also accepts bitcoin as a form of payment.”

Why would Palantir add Bitcoin (CCC:BTC-USD) to its balance sheet? As an investment? It already accepts bitcoin as a form of payment, which can either improve or deteriorate profitability. Any collapse in the price of Bitcoin will make things worse from a financial perspective for Palantir, and any surge in Bitcoin price will artificially make things better. At the core of this development, any such profits will only be operational profits.

So this Bitcoin theme adds an extra level of risk to Palantir’s balance sheet and its income statement.

The High Business Model Concentration Risk Remains

The majority of business revenue for Palantir comes from U.S. government revenue and the contracts Palantir has with the U.S. government. Its commercial revenue is noticeably lower than government contract revenue.

Palantir’s client list is highly concentrated with the U.S. government, and while they seem to be happy with Palantir now, government contracts eventually end. In general, it is not good business sense to rely mainly on one customer, even if this customer is the U.S. government. One unexpected result could result in financial disaster.

I like the revenue growth that Palantir shows. But with profitability being absent, and a rich valuation in place even at the 50% decline off the 52-week high, the stock doesn’t seem cheap. The big question now is when profitability will occur? We just don’t know. The mix of these fundamental factors I outlined above makes me continue arguing to avoid Palantir stock.

On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com/. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.