DON’T SAY YOU DIDN’T KNOW | Palantir Earnings Preview

Summary

In this video, Felix discusses preparing for Palante's upcoming earnings report, highlighting common mistakes made by retail investors. He analyzes earnings per share expectations, historical performance, and market reactions to past earnings. Felix emphasizes the importance of understanding market positioning and short squeeze potential, using tools like Trad vision.IO. He advises against buying call options before earnings due to high implied volatility and suggests a cautious approach, considering Palante's long-term vision and management's track record.

Takeaways

• 📈 Felix is providing insights to prepare investors for Palante's upcoming earnings report, emphasizing the importance of avoiding common mistakes made by retail investors before earnings.
• 📊 The earnings per share expectations have risen by 32% compared to a year ago, indicating some analyst optimism, but revenue expectations are only up by 3%, which Felix likes due to the potential for beating low expectations.
• 🔢 Palante's management has a history of meeting or beating market expectations, with a pattern of mostly positive results except for a couple of misses.
• 📉 Historically, Palante's stock has shown significant price movements after earnings announcements, with four instances of large increases and six of large decreases within 24 hours post-earnings.
• 🤔 Felix suggests that understanding the reasons behind past price movements post-earnings is crucial for making informed investment decisions.
• 📊 Market positioning suggests a potential stock price movement between $22.80 and $32, indicating a significant expected volatility.
• 📈 Felix warns that a pre-earnings rally might lead to higher expectations and potentially a disappointment if the results do not meet these raised expectations.
• 🏦 Felix discusses the importance of short interest in the stock, as a high short interest can lead to a short squeeze and a rapid increase in the stock price if the news is better than expected.
• 📉 Current short interest in Palante is at 21.5%, which Felix considers a bit low, but he advises to watch for any increase in short volume leading up to the earnings announcement.
• 📝 Felix recommends avoiding buying call options before earnings due to high implied volatility making them expensive, and instead suggests selling options as a better strategy.
• 🌐 He advises using platforms like Tradision.io, a software he built, to analyze market positioning and probabilities for stock movements based on volatility and market sentiment.

Q & A

What is the main purpose of the video?

The main purpose of the video is to prepare retail investors for the upcoming Palante earnings report by educating them on common mistakes to avoid and providing insights on market trends, probabilities, and potential short squeezes.

How has the earnings per share expectation changed compared to a year ago?

The earnings per share expectations have increased by 32% compared to a year ago, indicating some analyst optimism.

What is the expected revenue growth for Palante?

The expected revenue growth for Palante is only 3%, which the speaker likes because low expectations can lead to higher chances of beating market expectations.

How has Palante's management performed in terms of meeting or beating earnings expectations in the past?

Palante's management has generally performed well, with a history of beating market expectations, although there have been a couple of misses.

What is the significance of the stock's movement a week before the earnings report?

A week before the earnings report, if the stock has rallied significantly, it might not be a good sign as it sets high expectations, increasing the likelihood of disappointment if the results do not meet these expectations.

What does the speaker suggest is the best way to trade options around earnings reports?

The speaker advises against buying call options just before earnings reports due to high implied volatility making options expensive. Instead, he suggests selling options, such as using a credit spread or bull spread strategy.

What is the current short interest in Palante's stock, and how does it relate to potential short squeezes?

The current short interest is at 21.5%, which is considered a bit low for a significant short squeeze. However, the speaker suggests watching for this number to increase in the week leading up to the earnings report, as higher short interest could lead to a more explosive move up if the company beats expectations.

What is the expected stock price movement range according to market positioning?

The market positioning suggests an expected stock price movement range between $28 and $32, indicating a potential $10 move, which is nearly a 20% move.

What does the speaker mean by 'IV percent', and why is it important for options trading?

IV percent refers to the implied volatility percentage. It is important for options trading because high IV makes options expensive, while low IV makes them cheaper. The speaker advises selling options when IV is high and buying them when it's low.

What is the speaker's view on the long-term prospects of Palante compared to the short-term?

The speaker is cautiously optimistic in the short term but is a long-term optimist. He believes that Palante's management has a long-term vision similar to companies like Amazon and Tesla, focusing on building great products that will attract customers in the long run.

What advice does the speaker give regarding the allocation of growth stocks in a portfolio?

The speaker advises to keep the allocation to growth stocks small initially, such as 5% of a portfolio, and let the stock grow into a larger proportion of the portfolio if it succeeds. This approach minimizes risk while allowing for significant gains if the stock performs well.