The end of Palantir? (Why $PLTR is down and keeps dropping?)

Summary

The video discusses Palante's exceptional quarterly performance, where it exceeded expectations on all metrics, including revenue and earnings per share, and provided optimistic guidance for the rest of 2024. Despite this, the stock price dropped significantly post-earnings release, which the speaker attributes to high market expectations and subsequent disappointment. The speaker remains bullish on Palante, comparing its potential to that of Salesforce and Microsoft, and sees the current dip as a buying opportunity. Key highlights include a net dollar retention rate of 108%, a 9% year-over-year growth in spending from the top 20 customers, a 450% increase in net income, and a positive trend in assets and liabilities. The company's revenue per employee stands at an impressive $700,000, and despite a high price-to-earnings ratio, Palante is seen as a company that is growing into its valuation with a strong potential for future growth.

Takeaways

• 📈 Palante had one of its best quarters ever, exceeding expectations on revenue and earnings per share, and providing strong guidance for the rest of 2024.
• 📉 Despite the strong quarter, the stock price dropped significantly after earnings were released, likely due to high market expectations and subsequent sell-off.
• 🤔 The drop may not matter for long-term investors, as the fundamentals of the company remain strong and the short-term volatility is considered irrelevant in the long run.
• 🎯 Crowd psychology played a role in the stock's performance, with expectations being so high that the market overreacted to the earnings release.
• 🚀 The company's net dollar retention improved to 110%, indicating that Palante is retaining and growing its client base effectively.
• 💹 Palante's top 20 customers increased their spend by 9% year-over-year, showing loyalty and continued investment in the company's services.
• 📊 Net income saw a massive increase of 450%, reflecting improved efficiency, scalability, and profitability for Palante.
• 💼 The balance sheet remains strong with $4 billion in cash and no debt, and the company continues to improve its asset and liability positions.
• 👥 Revenue per employee is exceptionally high at $700,000, placing Palante among the top tier of companies in terms of revenue generation per employee.
• 🤝 Palante's price-to-earnings (PE) ratio has improved significantly, from 200 a year ago to 58, indicating the company is growing into its valuation.
• 🌱 The company is still in an early stage of commercial growth, with substantial growth and success potential baked into the current price.

Q & A

Why did Palante's stock drop despite having one of its best quarters?

The stock dropped due to high market expectations. The stock had increased by 8% in a single day and 20% over two weeks leading up to the earnings report. When the earnings were released and did not significantly exceed expectations, the stock began to correct, leading to a sell-off.

What is the significance of Palante's net dollar retention rate of 108%?

A net dollar retention rate of 108% means that Palante's clients, on average, have increased their spending by 8% more than what they paid the previous year, indicating strong customer retention and growth in revenue from existing customers.

How does Palante's year-over-year growth of its top 20 customers impact the company?

The 9% year-over-year growth of Palante's top 20 customers, who generate almost half of the company's business, indicates that these key clients are increasing their spending, reducing the risk of client concentration and showing a commitment to the company's services.

What is the implication of Palante's net income increase of 450%?

The 450% increase in net income from $19.5 million to $106 million signifies a substantial improvement in operational efficiency and profitability, suggesting that Palante is scaling effectively and managing its costs well.

How does Palante's balance sheet compare to its previous state?

Palante's balance sheet has improved with assets up 7% year-over-year and liabilities down 7%, indicating financial health and a strong position with $4 billion in cash and no debt.

What does Palante's revenue per employee indicate about the company?

Generating about $700,000 revenue per employee, Palante is highly efficient and competitive in terms of productivity per worker, placing it among the top-tier companies globally.

Why is Palante's price-to-earnings (PE) ratio decreasing?

Palante's PE ratio is decreasing because the company has recently turned profitable, and as it continues to grow into its valuation, the PE ratio is becoming more reasonable, reflecting the company's improved financial performance.

What does the lag in revenue growth imply for Palante's future?

The lag in revenue growth suggests that there is a significant potential for future revenue increases as the company's customer on-boarding cycle matures, and the growth in the pipeline translates into actual revenue.

How does Palante's US commercial growth compare to its overall growth?

Palante's US commercial growth is robust, with a 40% year-over-year increase and a 70% increase in US commercial customer growth, indicating a strong market position and potential for further expansion.

What is the potential impact of Palante's remaining deal value and total contract value on its revenues?

With a 74% increase in US commercial remaining deal value and a 131% increase in total contract value, Palante is well-positioned for substantial revenue growth as these deals materialize.

Why might a long-term investor not be concerned about Palante's stock drop after earnings?

A long-term investor might not be concerned because such short-term market fluctuations are often irrelevant to the company's underlying value and long-term potential, especially if the company continues to execute well and deliver on its growth strategy.