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.

Outlines

00:00

📊 Preparing for Palantir's Earnings Report

Felix opens by discussing the importance of being well-prepared for Palantir's upcoming earnings report. He highlights common mistakes retail investors make and promises that viewers will avoid these by the end of the video. Felix explains that the video will cover trends, setup, probabilities, and the likelihood of a short squeeze. He mentions the success of his trading portfolio, which is up 80% this year, and invites viewers to a webinar where he will share his trading strategy for free.

05:02

📈 Analyzing Earnings Expectations and Market Reactions

Felix examines the current earnings per share (EPS) expectations for Palantir, noting they are 32% higher than a year ago, indicating analyst optimism. He prefers low market expectations as they are easier to beat. Reviewing past earnings, he shows that Palantir has a strong track record of meeting or exceeding EPS expectations, which bodes well for the upcoming report. Felix also discusses the market's reaction to past earnings, highlighting both significant gains and losses following earnings announcements.

10:02

🔍 Understanding Short Volume and Its Impact on Stock Price

Felix explores the concept of short volume and its potential to drive a stock price upward through a short squeeze. He reviews historical short volume percentages for Palantir around earnings dates, showing that high short interest has coincided with significant price increases. Currently, Palantir's short volume is at 21.5%, lower than past peaks, but Felix advises watching this number leading up to the earnings report. He explains that higher short volume could lead to a more explosive upward move if earnings beat expectations.

💡 Evaluating Market Sentiment and Trading Strategies

Felix analyzes recent trading activity and market sentiment for Palantir, observing a generally bearish outlook among traders. He advises against buying call options due to high implied volatility, which makes options expensive. Instead, he recommends considering a credit spread or a bull spread, which involves selling options. Felix explains that this strategy takes advantage of the high volatility and has a higher probability of making a profit.

📉 Managing Risk and Building a Long-Term Portfolio

Felix advises taking a cautious approach given the recent rally in Palantir's stock price and the uncertainty surrounding AI. He suggests building a position gradually by buying small amounts regularly. Felix emphasizes the importance of maintaining a diversified portfolio and allowing successful stocks to grow into a larger portion of the portfolio. He concludes by reiterating the importance of patience and long-term thinking in investing.

🧘 Staying Calm and Informed Before Earnings

Felix stresses the importance of not making rash decisions before earnings announcements. He explains how implied volatility typically increases leading up to earnings and then drops afterward, making options cheaper post-earnings. Felix advises buying options after earnings to get better prices and maximize returns. He invites viewers to join his webinar for more detailed guidance on his trading strategies.

Keywords

💡Earnings

Earnings refer to the profits a company makes over a specific period, typically a quarter or year. In the video, the host discusses the expectations of Palante's earnings report and how it can affect the stock price. The script mentions 'earnings per share expectations' and how they have risen, indicating analyst optimism.

💡Retail Investors

Retail investors are individual investors who buy and sell securities for their personal accounts, as opposed to institutional investors. The video aims to educate retail investors on how to avoid common mistakes before an earnings report and how to prepare for potential market movements.

💡Short Squeeze

A short squeeze occurs when a stock's price increases sharply, forcing short sellers to close their positions by buying the stock, which in turn drives the price up even further. The script discusses the likelihood of a short squeeze for Palante, especially if there is an increase in short volume before the earnings report.

💡Volatility

Volatility is a measure of the rate at which the price of a security increases or decreases. In the context of the video, the host talks about the expected stock price movement range and how volatility can affect the stock's price, especially around earnings announcements.

💡Options

Options are financial instruments that give the buyer the right, but not the obligation, to buy or sell an underlying asset at a set price within a certain time frame. The video advises against buying call options before earnings due to high implied volatility, which makes them expensive.

💡Credit Spread

A credit spread is an options strategy that involves selling an option and buying another option of the same type, with a different strike price or expiration date, to create a net credit. The video suggests using a bull spread as a classic earnings trade, as it involves selling options when they are expensive due to high volatility.

💡Hedge Funds

Hedge funds are investment funds that pool capital from accredited individuals or institutional investors and invest in a variety of assets, often using complex strategies. The script mentions the host's background as a hedge fund analyst and the use of data to make informed trading decisions.

💡Market Positioning

Market positioning refers to the overall sentiment or stance of investors in the market regarding a particular security. The video discusses how market positioning can indicate the potential direction of a stock's price movement, especially in the context of an upcoming earnings report.

💡Implied Volatility (IV)

Implied volatility is a measure of the expected volatility of a security's price and is implied by the market price of options. The script warns against buying options when IV is high, as they are more expensive, and suggests waiting for earnings to be released when IV typically drops.

💡Bullish and Bearish Sentiment

Bullish sentiment indicates that investors have a positive outlook on a security or market, expecting prices to rise. Conversely, bearish sentiment suggests a negative outlook, expecting prices to fall. The video describes the market's bearish sentiment towards Palante's upcoming earnings report based on trading activity.

💡Financial Education

Financial education refers to the knowledge and understanding of financial concepts and skills. The host emphasizes the importance of financial education for retail investors, offering to share his trading strategy and insights to help them make informed decisions.

Highlights

Felix offers financial education to help investors prepare for Palante's earnings report.

The channel's trading portfolio is up 80% this year, with a $24,000 profit on a $30,000 teaching portfolio.

Earnings per share expectations have risen by 32% compared to a year ago, indicating analyst optimism.

Revenue expectations are low, with only a 3% increase anticipated, which Felix prefers for potential earnings surprises.

Palante's management has a history of beating market expectations, with a pattern of mostly positive earnings reports.

Market reactions to Palante's earnings have varied, with four significant upward moves and six downward moves in the past.

Felix discusses the use of Trad vision.IO, a software for market positioning and volatility analysis.

The market anticipates a potential 20% move in Palante's stock price post-earnings.

A pre-earnings rally may indicate high expectations, potentially leading to disappointment if not met.

Short interest in Palante's stock is analyzed as a potential indicator for a short squeeze and stock price movement.

Felix suggests watching for an increase in short volume leading up to the earnings report for potential upward movement.

The importance of market sentiment and large trade analysis is highlighted for predicting stock movement.

Felix advises against buying call options before earnings due to high implied volatility making them expensive.

A credit spread or bull spread is suggested as a better strategy for earnings plays, involving selling options.

Long-term vision and patience in stock investment is compared to the approaches of successful companies like Amazon and Tesla.

Felix emphasizes caution in the short term but remains optimistic about Palante's long-term prospects.

The importance of not treating stocks as lottery tickets and the strategy of gradual investment is discussed.

Felix explains the typical pattern of volatility around earnings events and the best timing for option purchases.

Transcripts

Felix here and with Palante earnings in

just under a week as I'm recording this

I want you to be the best prepared

investor out there and so many retail

investors make these big whopping

mistakes before earnings and by the end

of the video you will not be one of

those so let's profit and maximize from

that let me walk you through it let's go

straight into It

Felix welcome to the channel we're going

to look at the trend we're going to look

at what's typically happening we're

going to look at the setup we're going

to look at the probabilities we're going

to look at the short squeeze likelihood

and and everything in between so stick

around if you want to learn more about

what we do and how we do it and how

we're up 80% on our trading portfolio

this year that's literally $24,000

profit on a $30,000 teaching portfolio

then come and join me on Tuesday Felix

friends. weinar and I'll give you my

trading strategy for free why because

you deserve some Financial education

everybody deserves a bit of a leg up

here so what are we looking at here let

me get a pen and I'll make it a little

bit clearer so first of all the earnings

per share expect ations have gone up

somewhat they are 32% higher than they

were um you know by a year ago so what

is that saying to you there is some

analyst optimism not huge optimism but

some

optimism and is that good or bad well

Revenue we're expecting basically pretty

much nothing only a 3% increase here on

on the revenue front and I quite like

that so I like low expectations from the

market because earnings are about

beating expectations so we got pretty

low growth expectations and just a

little bit of expectation here on on

earnings per share going up to to 8

cents per share last quarter it was also

8 cents per share so we're expecting

zero Improvement on that front now half

Palante management delivered on wsit

expectations well if you look at this

here then you see the earnings per share

and have they beaten yes yes yes well

zero is still okay yes yes yes and then

you got two misses here miss miss right

sorry I haven't got a red pen here but

beat beat beat Miss beat beat beat beat

so Management's actually pretty good

they are sound bagging sufficiently to

beat Market expectations so from that

point of view it's likely that we'll

beat somewhat how does the market react

to it is it good well out of the last 10

earnings

one two three four big moves up in the

24 hours afterwards and then the other

six were I do have a red pen were

actually pretty pretty big moves down so

why do we move up those four times

that's what we need to understand here

so we can actually make money out of

this but before we look at that we can

know a little bit more and that is how

much is the stock going to move by and

you might say how the heck would you

know Felix well I've got a very smart

Golden Retriever and I don't rely on

that I rely on Market positioning so we

can calculate the probability of a stock

move on volatility and kind of Market

positioning it's a little bit

complicated but the software does it for

us here Trad vision. IO which is a

software that we built so the market is

saying to us we're going to be trading

between about

2280 and what does that say up there 32

$32 which is a is a $10 move right a

range but it's basically plus minus $5

which is almost a 20% move expected so

that's a big big big move could go up

could go down so which one is more

likely and then why did we go up like

this beautiful rally here for example in

February right that's the big question

you know the answer to that you'll have

a much much better understanding of

what's going go going to happen here

today or rather on earnings day on the

5th okay so the important thing I look

up just generally before earnings is you

know earnings are coming up on the fifth

here see it on the chart down there is a

little earning symbol a week out we have

rallied pretty gloriously right is that

a good thing or a bad thing it's

actually a bad thing why because

expectations are high this rally here is

done on the expectation that they're

going to monetize on a p and they're

going to send of customers and be more

profits and more revenue and it'll be

amazing down the road and you know

they're going to run the world uh you

know who runs the world you know and

therefore had we not had that rally I

would be more bullish because of the

rally the likelihood we get a

disappointment is higher because people

have a higher expectation now not All Is

Lost here but what we really need to

understand is as I say what happened to

the last on the last one so why did we

have these rallies and there have been a

few there's been this one here there's

been that one here for example right

that was always on earnings why did we

go up on those days well to understand

that one is we look at actual Market

positioning here and in a second I'm

sure you can look that up but the next

the key thing is we look at are people

shorting Palante here are those hedge

fund bastards shorting our stock and if

they are is that a bad thing or a good

thing it's actually a wonderful thing

it's a wonderful thing they short why

because they're short it and the news is

better than expected stock price goes up

and what do the shorts do the shorts

have to close their short positions how

do they close their short positions they

have to buy the stock because they sold

the stock now they have to buy it back

to get back to zero right so they have

minus you know a million shares now they

have to buy a million shares to go back

to zero so they stop losing money so

therefore the question is at what level

of short volume interest do we do we

squeeze so in February here that was a

pretty good

squeeze short volume was

25%

24.7% the

um May earnings we also shot up

initially right that was a you could

have made money if You' exited at the

top that was also guess what 25% so 25%

twice here let's go back a little bit as

I'm drawing random

lines um what about this set of earnings

here in November short volume

was this one here was

28% um so 28 25 25 on these last three

squeezes upwards because that's what the

what it was it wasn't just good news it

was short squeezes up so where are we

right now well right now we're sitting

at

21.5%

21.5% it's a little bit low now it was

lower on Friday so what I would do is I

would watch for this number and see do

we go higher on the short volume during

this week that leading up to earnings

and if we do then there is a higher

likelihood we have an explosive move up

if we beat right so that's the number to

watch for and if you don't know how to

look that number up um you can look it

up in trading view then then just ask me

on the live stream during the week I

gladly share that with you now the next

thing I would look at is just like okay

a week out it's about time that Traders

and institutions place bets on earnings

that's typically why you do it about a

week out most of the time and what do I

see so I Go Again into into Trad vision.

which is the the platform we built to

give you the same quality data that

hedge funds have access to and I used to

be a hedge funist um used to spend

$100,000 a year on on data well I didn't

the bank did um and so what are we

looking at here we're looking at trades

from the last trading day of Friday it's

only one that's the day before there

were obviously a few and then we look at

what's the sentiment like that was

bearish bearish bearish bearish okay

bullish bullish bearish bearish bullish

bearish bearish bearish bearish so you

get the idea right the market is broadly

bearish they're not really all that

excited about it there isn't really

anybody buying or there's one here

buying a call option into August but

it's only

$69,000 that's a small fish by Wall

Street standards and the bigger

trades what are some of the bigger

trades out here half a million that's

bearish so that's all generally what I

look at I look at the biggest trades I

don't really care about the small guys

CU they don't move the market here

700,000 700,000 guess what they're both

selling call options they're taking

profits that that's a bearish bearish

expression so I guess therefore the

question might be if you if you're

thinking like me is like how do make

make money out of this well the

classic the classic uh options trade or

the classic trade for earnings is not to

buy options so please please please do

not buy a call option it's on financial

advice but just generally it's a really

bad idea I'll tell you why there is

something called IV percent it's

volatility when it's high options are

expensive when it's low they're cheap so

what do you want to do when options are

expensive sell the bloody things don't

buy them the retailers because you know

we haven't had any Financial education

so nobody taught us this stuff and

therefore we buy options when IV is like

70 80

90% super super stupid because we

weren't taught it so you know now well

informed and and you don't you're not

going to have to do that anymore so what

will we do instead the classic earnings

trade is a is a a credit spread a bull

spread because there you are selling

effectively options it's a little bit

more complex cuz it's got two legs to it

but you could set something up that was

at the lower end of the expected range

here could even go really to the

expected range you could say look this

now has an 82% probability of making us

money you'd only make a 15% profit the

question is is that worth it I would

probably say no because the stock moves

so violently and we've had this

beautiful run up um had we had a you

know if earnings were here I'd be more

bullish because more likely we pop up

but given the beautiful run and and and

uncertainty around Ai and and expend and

just the way the market sees AI right

now because the market is short-term

thinking right they don't think a year

or two ahead whereas Palante does and

knowing what we know about Palante

management that they don't really care

about what Wall Street thinks they don't

really care about the stock price they

just care about building the greatest

product possible getting as many people

as possible to taste it so that they get

them addicted and hooked and then they

kind of think well somewhere down the

road in the next year or two those guys

are going to sign up because they're

going to try all the other stuff out

there that's maybe cheaper but it sucks

so they're going to come back to us

that's a very very very uh patient way

of selling and you see that I think in

the greatest companies you see that in

Amazon you see that in Tesla you see

that in those kind of companies that

really have long-term vision and they

building out products that are insanely

good Amazon for example you know their

their llm their chat gbt competitor no

one's talking about it right they're not

really promoting it it wipes the floor

with chat gbt in my opinion unlik most

things certainly language things um so

they're just building out good stuff and

they don't really care and they know the

customers will follow they've got the

audience and that's the Palante approach

and it's sort of the Venture Capital

approach from Silicon Valley sometimes

that can work really really well so

honestly I wouldn't I would just take a

chill pill um either buy Palante once a

month or something if you want to build

up a position keep it small because why

say it's a percent of your portfolio say

it's 5% of your portfolio and the stock

goes up by 10x well now it's almost half

your portfolio right if the stock goes

to zero unlikely but it could then what

have you lost not that much right you're

still okay that's how you want to

allocate towards growth stocks they

should grow themselves into a big

proportion of your portfolio otherwise

they failed they you should not have to

put in all the money on on on on you

know on red this isn't a lottery ticket

so that's the way I would look at that

so I'm I'm cautiously optimistic but

just from a market expectation point of

view I think it is we haven't got quite

enough short volume yet that might

increase this week I'd watch out for

that and we've rallied quite a lot so

things are a little bit stacked against

us here um on the long term I'm an

optimist but on the short term I'm just

a little bit cautious and please please

please don't go and buy cold options

just before earnings I tell you what

happens to

volatility over time so in line with the

stock price so this was the last

earnings event right so what happens

volatility in here in yellow goes up and

up and up and up and up and now the

uncertainty this is the moment where we

are most uncertain most fearful because

we don't know what the heck they've done

the last three months and then they tell

us they give us all the data and then

guess what volatility does this and then

it does the same thing again it goes up

and up and up and up and up and then it

comes down again so if you are somebody

who buys call options for crying out

loud take this too hard buy here okay

buy after earnings because they're much

cheaper much much cheaper and it'll be

good for you to buy them cheaper because

that's what it's all about Buy Low sell

high right I hope you got some value out

of this if you have come and join me on

Tuesday Phoenix rent weinar I'll spend

about an hour hour and a half really

guiding you through our proper

three-step system I'll show you exactly

how we're up $24,000 on a $30,000

teaching portfolio this year just this

year right and we trade like probably

two hours a week Max do very very very

little I'm very very lazy uh so come and

join me links Down Below in the

description and I look forward to see

you that today we're diving into the

seven best stocks to buy right now in

August 2024 Winston and Felix here but

there is a trick to this one of these

isn't a stock to buy at all it's one to

avoid like the plague intrigued well you

should be now before we embark on this

journey and research I got to tell you

something rather extra