Palantir: Buy On Q4 Bump, But Mind The Caveat

Seeking Alpha02-08 09:20

SummaryPalantir Technologies Inc. has shown strong price action post-earnings, with significant QoQ and YoY growth, suggesting a continued rally through FY 2025.PLTR's conservative guidance for FY ...

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It means they're confident of ongoing gains in the near term. And when you combine that with investors who are more than ready to reward that kind of growth, what you typically see is strong price action on earnings reports. Palantir Technologies Inc. (NASDAQ:PLTR) fits that description to a tee, so it is only natural for a blowout fourth quarter report to result in stronger-than-normal price action post earnings.SASAWe've seen this in action over the past two periods between the Q2 and Q4 2024 reports. See how the price action became stronger with each beat? I also believe the company is guiding conservatively for FY 2025. As a result, this should set it up for a continued rally through the full fiscal, and we should see some considerable gains made after Q1 2025 if my hunch is correct and management posts a strong YoY growth rate. The higher it is above the 31% full-fiscal guidance level for every quarter between now and then, the greater the chances that PLTR will end FY2025 at well over the guidance figure of $3.75 billion (which is 31% above the FY 2024 figure of $2.87 billion).That's essentially my Strong Buy thesis, but in addition to buying PLTR or adding to your current position, it's prudent to prepare to deal with the downside risk at these elevated valuations. With this article, I'll build my case for PLTR, and in a subsequent piece, I'll introduce an interesting leveraged ETF that you should definitely consider pairing with PLTR: the GraniteShares 2x Long PLTR Daily ETF (PTIR).In fact, my Strong Buy rating is contingent on having this pairing in place.Here's a quick taste of what's in store. Over the period between September 3, 2024, when the fund was incepted, and today, February 4, 2025, as I write this, the total return on PLTR compared to the TR on an investment in PTIR was what you see in the graph below.ChartData by YChartsInteresting, right? First, let me set up the strategy with a full discussion of why I'm very bullish on Palantir Technologies.The Palantir Bull CasePLTR investors already know the headline numbers for Q4 2024, but a quick recap should help set the tone for my thesis.What Palantir Did in Q4 2024Top-line growth in Q4 was, in many ways, a vindication for long-term bullish investors who were forced to see PLTR go through troughs as low as well under $7 a share toward the end of FY 2022. That was a time when revenue growth rates were on the decline, moving from 26% in the June 2022 quarter all the way down to 12.75% the following year.SASAGrowth has returned to PLTR forcefully since that time, and these same investors who were looking with dismay at single-digit share prices are now reaping the reward for their patience through the worst of it. And what a reward! The moment the market saw the 36% YoY and 14% QoQ jump in total revenues, it immediately rewarded the stock with a 24% price boost.SAYou might say at this point that such growth was unexpected, but try looking at it from another perspective: Street analysts seemed to be getting their revenue growth estimates more and more wrong since that June 2022 quarter I referred to earlier. Bar the temporary dip in Q2 and Q3 of 2023, the beats kept coming it stronger and stronger until it hit over 6% in Q4.SAIs it any wonder, then, that the highest-ever surprise beat of 6.65% led to the massive 24% price increase? Well, some might say it was excessive, and they could be right. However, I look at it a little differently. The market isn't necessarily rewarding current performance; I believe it's rewarding future performance based on elevated forward expectations. Not necessarily a bad thing in and of itself, but it does step up the risk element quite a bit.Author, from SA DataTo elaborate on that point about Street estimates growing increasingly off the mark, look at the graph above. Read right to left, the blue line shows how analysts have lost their ability to accurately predict Palantir's future revenues. The red bars show how many millions of dollars were added each quarter to the top line. Note the fair amount of seasonality in revenue growth, with Q4 usually being their strongest quarter. Palantir is now expected to post Q1 revenues of $869.27 million, but you can already see Street analysts lining up to revise their estimates upward.Per my reckoning, analysts are now trying to beat PLTR at its own game by pushing the estimate for Q1 2025 up to 37% YoY, which is what their expectation of $869.27 million represents. Q1 generally being PLTR's weakest quarter, it could go either way, but I'm betting on the company to crush that estimate.Where's This Strong Growth Going to Come From?To support my claim, let's look at the drivers underlying such strong growth. I believe we're just getting started on this new path.The first driver of growth is the company's RDV, or remaining deal value. It's more popularly known as remaining performance obligations or RPO, and it is the dollar value of contractual obligations that have yet to be delivered. These are not random projections of TAM or any other kind of estimate. They are hard benefits that will be recognized in the books in future dates. Unless PLTR is unable to deliver, a client reneges on a contract, or there are reductions in the pre-negotiated pricing, it's almost a guaranteed revenue item. The only variable here is the specific quarter in which these revenues will be realized.PLTR reported an RDV of $1.79 billion for its U.S. Commercial segment, so if that's fully converted into reported revenues over the next four quarters, it already covers 48% of the $3.75 billion guidance for FY 2025. That's just from the U.S. and just the commercial segment. And with TCV or total contract value reported at $803 million for this segment, the deals now represent a deluge that just needs near-flawless execution — another risk, you might say, but execution where Palantir's management excels. This will be the primary growth driver for FY 2025.The second growth engine for PLTR is its U.S. government segment revenues. These “only” grew 45% YoY and 7% sequentially, rather than the U.S. commercial segment's 64% and 20% YoY and QoQ, respectively, so I think 2025 is the year that commercial overtakes government in PLTR's U.S. market.Government revenues are typically lumpy and slow-growing, and the 7% QoQ figure validates this. However, the macro situation is now very favorable to U.S. AI companies like Palantir. According to Wedbush's Dan Ives:As Project Stargate takes hold this is bullish for the likes of Palantir (PLTR)...Even though PLTR is not a direct beneficiary of the $500 billion planned budget for Stargate over the next 5 years, its software strengths and the sheer data volumes it handles will, in my opinion, position it as a significant participant.So, we have two major growth drivers on the home front, with overseas revenues offering some padding. Overall, the 29% YoY growth rate for FY 2024 is the highest we've seen in the past three years. Set against those strong growth drivers and macro tailwinds, you can see why I think a 31% revenue growth guidance for FY 2025 is conservative.Why Am I Not Looking at Shareholder Equity or Bottom-Line Profitability?Although PLTR's bottom line is extremely healthy now compared to just three years ago, when it was still in the red, I don't think this is something investors should be concerned about — at least for now. Net income and EPS are no doubt a good indication of a business's ability to plow back cash into growing the business, but this would only worry me if operating cash flows were also negative. They haven't been negative since FY 2021, and even net income has turned positive over the past two years.As a result of this improved profitability, there's some amount of retained earnings deficit reduction happening over the past couple of years, which is a good thing. Far more important, though, is the company's ability to keep growing the operating expenses that directly contribute to revenue growth. If PLTR is making a dollar in revenue and spends that whole dollar to generate a dollar-thirty in the next fiscal year, I'm okay with that. Why? Because revenue growth is what excites investors more than profitability, so a dismal EPS doesn't hurt me if the stock price appreciates by five, ten, or twenty percent every year. I don't get any benefit from a higher EPS unless it translates to a higher share price over time; I DO get a benefit from higher revenues over time because the market will inevitably increase the value of my shares.As a very loose parallel, look at what's happening with Apple (AAPL) right now. AAPL revenue growth is down to under 3% YoY as of the TTM period as well as FY 2024. That's when EPS matters. If earnings growth rates were positive, they may have helped offset the lackluster topline growth, but they're not, so they haven't. The result is a loss of investor confidence, and it reflects directly on share price.AAPL Share Price YTD (SA)But that's a story for a different article, where I'll continue with my ongoing bearish Apple narrative.As for PLTR, I think it's a good thing that the company has used equity issuance and SBC dilution to grow its business to this level because that means little to no debt on the books. Moving forward, the company's new-found profitability should increasingly lower its current retained earnings deficit of about $5.2 billion, while still allowing the strong cash flows to keep the revenue needle moving in the right direction.Data by YChartsNow for the Elephant in the Room — Valuation!PLTR's valuation in one word: ridiculous! But allow me to put that in the right context. You've seen why I didn't go much lower than the operating level to look at this company's health, so I don't really put much stock in price to earnings or price to book for companies that are growing revenues in the double digits even after they hit billions in annual sales. PLTR is now in that league of extraordinary stocks.Yes, some metrics are critically important to me, such as quarterly cash balances, debt levels, operating cash flows, and many others. Others, not so much because at the end of the day, the value of a company is exactly what the market thinks it should be. I'm not a proponent of the efficient market hypothesis, which is still a hypothesis, by the way, but apart from the market price, there's really no way to pin valuation down to an intrinsic value or a relative multiple.Let me drive home that point. On February 7, Sotheby's is auctioning Muhammed Ali's “‘Thrilla in Manila’ Fight Worn Everlast Shorts.” The bidding starts at a million dollars. Even if I had the money, I wouldn't pay that much for someone's sweaty shorts. That's because I don't perceive the value in owning them, regardless of the owner/user. But there are entire industries thriving on perceived value, aren't there?Of course, if I could get it for a million and sell it for a million and a half, that then becomes a vehicle of wealth, which is a different matter. What it is NOT is of any value to me whatsoever, intrinsic or otherwise. So I'm not going to buy it, whether it's a million dollars or one dollar. In fact, I'd probably spend a hefty amount on security, maintenance, and such, essentially making it even pricier.Stocks are vehicles of wealth, so even though I can't see myself valuing Ali's shorts at 33,333 times the price of a regular Everlast pair that retails for $30, I'll buy it as long as I have the confidence that someone else will value it even higher in the future. Heck, I'd even buy the $30 pair if I can sell it for $45.Drawing a parallel to PLTR, if you look at its price to adjusted forward earnings multiple of +180 or its price to forward book value multiple in the mid-30s (don't even go near the TTM multiples!), you'd be tempted to stay away. It's like Ali's million-dollar shorts. But if you look at it as a vehicle of wealth, you'll realize that there are people willing to pay the $110+ per share — and possibly a lot more — for a stock that was once not even worth $7.Final Thoughts on RiskBy its nature, PLTR is a risky investment. Although I don't put much stock in valuing such companies, the market certainly does. The more these valuations are stretched, the greater the chances of massive correction. Look at what happened to Nvidia Corp. (NVDA) shares when the news of DeepSeek (DEEPSEEK) broke, and you'll see that this is true.The same could happen if PLTR misses on revenue expectations from Street analysts in the next quarter, or the next, or the one after that.That's why I believe it's a positive that management has guided cautiously for FY 2025. I think 31% is lowballing it, considering the contracts pipeline and the strong momentum of revenue recognition on the back of that ample supply.Finally, I'd like to reiterate that my Strong Buy recommendation is contingent on the use of leverage to boost PLTR's unrealized gains over FY 2025. I'll detail the process in my very next article. See you then!","kind":"news","is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[{"id":401434169200888,"gmtCreate":1739033881626,"gmtModify":1739033883729,"author":{"id":"3574547619690492","authorId":"3574547619690492","name":"UTOtrader","avatar":"https://static.tigerbbs.com/82be6befb29ac8516e463638d3f659d5","vip":1,"crmLevel":5,"crmLevelSwitch":0,"idStr":"3574547619690492","authorIdStr":"3574547619690492"},"htmlText":"Buy","listText":"Buy","text":"Buy","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/401434169200888","repostId":1130728137,"repostType":4,"repost":{"id":"1130728137","kind":"news","pubTimestamp":1738977622,"share":"https://ttm.financial/m/news/1130728137?lang=&edition=fundamental","pubTime":"2025-02-08 09:20","market":"us","language":"en","title":"Palantir: Buy On Q4 Bump, But Mind The Caveat","url":"https://stock-news.laohu8.com/highlight/detail?id=1130728137","media":"Seeking Alpha","summary":"First, let me set up the strategy with a full discussion of why I'm very bullish on Palantir Technologies.The Palantir Bull CasePLTR investors already know the headline numbers for Q4 2024, but a quick recap should help set the tone for my thesis.W","content":"<html><head></head><body><h2 id=\"id_764253206\">Summary</h2><ul style=\"\"><li><p>Palantir Technologies Inc. has shown strong price action post-earnings, with significant QoQ and YoY growth, suggesting a continued rally through FY 2025.</p></li><li><p>PLTR&#39;s conservative guidance for FY 2025 sets the stage for potential revenue growth beyond the 31% target, driven by robust U.S. commercial and government segment momentum.</p></li><li><p>Despite high valuations, PLTR&#39;s revenue growth and minimal debt make it a compelling investment, especially when paired with the GraniteShares 2x Long PLTR Daily ETF (PTIR).</p></li><li><p>Leveraging PTIR with PLTR can maximize gains during bullish rallies, doubling returns and increasing margin of safety, albeit with higher risk.</p></li></ul><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/032c80f9e75029379c74205b43ec59e6\" alt=\"Palantir Technologies headquarters campus exterior view in Silicon Valley. - Palo Alto, California, USA - 2019\" title=\"Palantir Technologies headquarters campus exterior view in Silicon Valley. - Palo Alto, California, USA - 2019\" tg-width=\"750\" tg-height=\"500\"/><span>Palantir Technologies headquarters campus exterior view in Silicon Valley. - Palo Alto, California, USA - 2019</span></p><p></p><p><strong>Michael Vi</strong></p><p></p><p>It&#39;s always a good sign when companies report QoQ growth figures alongside YoY numbers. It means they&#39;re confident of ongoing gains in the near term. And when you combine that with investors who are more than ready to reward that kind of growth, what you typically see is strong price action on earnings reports. <strong>Palantir Technologies Inc.</strong> (NASDAQ:PLTR) fits that description to a tee, so it is only natural for a blowout fourth quarter report to result in stronger-than-normal price action post earnings.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/b54f183370b9bd3c1996af31242876ec\" alt=\"SA\" title=\"SA\" tg-width=\"640\" tg-height=\"310\"/><span>SA</span></p><p style=\"text-align: left;\"><strong>SA</strong></p><p></p><p>We&#39;ve seen this in action over the past two periods between the Q2 and Q4 2024 reports. See how the price action became stronger with each beat? I also believe the company is guiding conservatively for FY 2025. As a result, this should set it up for a continued rally through the full fiscal, and we should see some considerable gains made after Q1 2025 if my hunch is correct and management posts a strong YoY growth rate. The higher it is above the 31% full-fiscal guidance level for every quarter between now and then, the greater the chances that PLTR will end FY2025 at well over the guidance figure of $3.75 billion (which is 31% above the FY 2024 figure of $2.87 billion).</p><p>That&#39;s essentially my Strong Buy thesis, but in addition to buying PLTR or adding to your current position, it&#39;s prudent to prepare to deal with the downside risk at these elevated valuations. With this article, I&#39;ll build my case for PLTR, and in a subsequent piece, I&#39;ll introduce an interesting leveraged ETF that you should definitely consider pairing with PLTR: the GraniteShares 2x Long PLTR Daily ETF (PTIR).</p><p><strong>In fact, my Strong Buy rating is contingent on having this pairing in place.</strong></p><p>Here&#39;s a quick taste of what&#39;s in store. Over the period between September 3, 2024, when the fund was incepted, and today, February 4, 2025, as I write this, the total return on PLTR compared to the TR on an investment in PTIR was what you see in the graph below.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/b7998b0528f4a78c2a81199f3cf568b5\" alt=\"Chart\" title=\"Chart\" tg-width=\"635\" tg-height=\"439\"/><span>Chart</span></p><p>Data by YCharts</p><p></p><p>Interesting, right? First, let me set up the strategy with a full discussion of why I&#39;m very bullish on Palantir Technologies.</p><h2 id=\"id_2351945947\">The Palantir Bull Case</h2><p>PLTR investors already know the headline numbers for Q4 2024, but a quick recap should help set the tone for my thesis.</p><h3 id=\"id_3450058967\">What Palantir Did in Q4 2024</h3><p>Top-line growth in Q4 was, in many ways, a vindication for long-term bullish investors who were forced to see PLTR go through troughs as low as well under $7 a share toward the end of FY 2022. That was a time when revenue growth rates were on the decline, moving from 26% in the June 2022 quarter all the way down to 12.75% the following year.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/95ec2d8f39a4ceae0e04b6694c590aa5\" alt=\"SA\" title=\"SA\" tg-width=\"640\" tg-height=\"149\"/><span>SA</span></p><p style=\"text-align: left;\"><strong>SA</strong></p><p></p><p>Growth has returned to PLTR forcefully since that time, and these same investors who were looking with dismay at single-digit share prices are now reaping the reward for their patience through the worst of it. And what a reward! The moment the market saw the 36% YoY and 14% QoQ jump in total revenues, it immediately rewarded the stock with a 24% price boost.</p><p></p><p><social-image src=\"https://static.seekingalpha.com/uploads/2025/2/4/59285166-1738720786097977.png\" alt=\"SA\"></social-image></p><p style=\"text-align: left;\"><strong>SA</strong></p><p></p><p>You might say at this point that such growth was unexpected, but try looking at it from another perspective: Street analysts seemed to be getting their revenue growth estimates more and more wrong since that June 2022 quarter I referred to earlier. Bar the temporary dip in Q2 and Q3 of 2023, the beats kept coming it stronger and stronger until it hit over 6% in Q4.</p><p></p><p><a href=\"https://static.seekingalpha.com/uploads/2025/2/4/59285166-17387211456223183_origin.png\" title=\"\" class=\"\"><social-image src=\"https://static.seekingalpha.com/uploads/2025/2/4/59285166-17387211456223183.png\" alt=\"SA\"></social-image></a></p><p style=\"text-align: left;\"><strong>SA</strong></p><p></p><p>Is it any wonder, then, that the highest-ever surprise beat of 6.65% led to the massive 24% price increase? Well, some might say it was excessive, and they could be right. However, I look at it a little differently. The market isn&#39;t necessarily rewarding current performance; I believe it&#39;s rewarding future performance based on elevated forward expectations. Not necessarily a bad thing in and of itself, but it does step up the risk element quite a bit.</p><p></p><p><a href=\"https://static.seekingalpha.com/uploads/2025/2/5/59285166-17387529464676871_origin.png\" title=\"\" class=\"\"><social-image src=\"https://static.seekingalpha.com/uploads/2025/2/5/59285166-17387529464676871.png\" alt=\"Author, from SA Data\"></social-image></a></p><p style=\"text-align: left;\"><strong>Author, from SA Data</strong></p><p></p><p>To elaborate on that point about Street estimates growing increasingly off the mark, look at the graph above. Read right to left, the blue line shows how analysts have lost their ability to accurately predict Palantir&#39;s future revenues. The red bars show how many millions of dollars were added each quarter to the top line. Note the fair amount of seasonality in revenue growth, with Q4 usually being their strongest quarter. Palantir is now expected to post Q1 revenues of $869.27 million, but you can already see Street analysts lining up to revise their estimates upward.</p><p>Per my reckoning, analysts are now trying to beat PLTR at its own game by pushing the estimate for Q1 2025 up to 37% YoY, which is what their expectation of $869.27 million represents. Q1 generally being PLTR&#39;s weakest quarter, it could go either way, but I&#39;m betting on the company to crush that estimate.</p><h3 id=\"id_124982413\">Where&#39;s This Strong Growth Going to Come From?</h3><p>To support my claim, let&#39;s look at the drivers underlying such strong growth. I believe we&#39;re just getting started on this new path.</p><p><strong>The first driver of growth</strong> is the company&#39;s RDV, or remaining deal value. It&#39;s more popularly known as remaining performance obligations or RPO, and it is the dollar value of contractual obligations that have yet to be delivered. These are not random projections of TAM or any other kind of estimate. They are hard benefits that will be recognized in the books in future dates. Unless PLTR is unable to deliver, a client reneges on a contract, or there are reductions in the pre-negotiated pricing, it&#39;s almost a guaranteed revenue item. The only variable here is the specific quarter in which these revenues will be realized.</p><p>PLTR reported an RDV of $1.79 billion for its U.S. Commercial segment, so if that&#39;s fully converted into reported revenues over the next four quarters, it already covers 48% of the $3.75 billion guidance for FY 2025. That&#39;s just from the U.S. and just the commercial segment. And with TCV or total contract value reported at $803 million for this segment, the deals now represent a deluge that just needs near-flawless execution — another risk, you might say, but execution where Palantir&#39;s management excels. This will be the primary growth driver for FY 2025.</p><p><strong>The second growth engine</strong> for PLTR is its U.S. government segment revenues. These “only” grew 45% YoY and 7% sequentially, rather than the U.S. commercial segment&#39;s 64% and 20% YoY and QoQ, respectively, so I think 2025 is the year that commercial overtakes government in PLTR&#39;s U.S. market.</p><p>Government revenues are typically lumpy and slow-growing, and the 7% QoQ figure validates this. However, the macro situation is now very favorable to U.S. AI companies like Palantir. According to Wedbush&#39;s Dan Ives:</p><blockquote><p>As Project Stargate takes hold this is bullish for the likes of Palantir (PLTR)...</p></blockquote><p>Even though PLTR is not a direct beneficiary of the $500 billion planned budget for Stargate over the next 5 years, its software strengths and the sheer data volumes it handles will, in my opinion, position it as a significant participant.</p><p>So, we have two major growth drivers on the home front, with overseas revenues offering some padding. Overall, the 29% YoY growth rate for FY 2024 is the highest we&#39;ve seen in the past three years. Set against those strong growth drivers and macro tailwinds, you can see why I think a 31% revenue growth guidance for FY 2025 is conservative.</p><h2 id=\"id_3673674783\">Why Am I Not Looking at Shareholder Equity or Bottom-Line Profitability?</h2><p>Although PLTR&#39;s bottom line is extremely healthy now compared to just three years ago, when it was still in the red, I don&#39;t think this is something investors should be concerned about — at least for now. Net income and EPS are no doubt a good indication of a business&#39;s ability to plow back cash into growing the business, but this would only worry me if operating cash flows were also negative. They haven&#39;t been negative since FY 2021, and even net income has turned positive over the past two years.</p><p>As a result of this improved profitability, there&#39;s some amount of retained earnings deficit reduction happening over the past couple of years, which is a good thing. Far more important, though, is the company&#39;s ability to keep growing the operating expenses that directly contribute to revenue growth. If PLTR is making a dollar in revenue and spends that whole dollar to generate a dollar-thirty in the next fiscal year, I&#39;m okay with that. Why? Because revenue growth is what excites investors more than profitability, so a dismal EPS doesn&#39;t hurt me if the stock price appreciates by five, ten, or twenty percent every year. I don&#39;t get any benefit from a higher EPS unless it translates to a higher share price over time; I DO get a benefit from higher revenues over time because the market will inevitably increase the value of my shares.</p><p>As a very loose parallel, look at what&#39;s happening with Apple (AAPL) right now. AAPL revenue growth is down to under 3% YoY as of the TTM period as well as FY 2024. That&#39;s when EPS matters. If earnings growth rates were positive, they may have helped offset the lackluster topline growth, but they&#39;re not, so they haven&#39;t. The result is a loss of investor confidence, and it reflects directly on share price.</p><p></p><p><a href=\"https://static.seekingalpha.com/uploads/2025/2/5/59285166-17387595708630884_origin.png\" title=\"\" class=\"\"><social-image src=\"https://static.seekingalpha.com/uploads/2025/2/5/59285166-17387595708630884.png\" alt=\"SA\"></social-image></a></p><p style=\"text-align: left;\"><strong>AAPL Share Price YTD (SA)</strong></p><p></p><p>But that&#39;s a story for a different article, where I&#39;ll continue with my ongoing bearish Apple narrative.</p><p>As for PLTR, I think it&#39;s a good thing that the company has used equity issuance and SBC dilution to grow its business to this level because that means little to no debt on the books. Moving forward, the company&#39;s new-found profitability should increasingly lower its current retained earnings deficit of about $5.2 billion, while still allowing the strong cash flows to keep the revenue needle moving in the right direction.</p><p></p><p><social-image src=\"https://static.seekingalpha.com/uploads/2025/2/6/saupload_259d886dc0be3f400b5b8ada43ad4dd9.png\" alt=\"Chart\"></social-image></p><p>Data by YCharts</p><p></p><h2 id=\"id_735333356\">Now for the Elephant in the Room — Valuation!</h2><p>PLTR&#39;s valuation in one word: ridiculous! But allow me to put that in the right context. You&#39;ve seen why I didn&#39;t go much lower than the operating level to look at this company&#39;s health, so I don&#39;t really put much stock in price to earnings or price to book for companies that are growing revenues in the double digits even after they hit billions in annual sales. PLTR is now in that league of extraordinary stocks.</p><p>Yes, some metrics are critically important to me, such as quarterly cash balances, debt levels, operating cash flows, and many others. Others, not so much because at the end of the day, the value of a company is exactly what the market thinks it should be. I&#39;m not a proponent of the efficient market hypothesis, which is still a hypothesis, by the way, but apart from the market price, there&#39;s really no way to pin valuation down to an intrinsic value or a relative multiple.</p><p>Let me drive home that point. On February 7, Sotheby&#39;s is auctioning Muhammed Ali&#39;s “‘Thrilla in Manila’ Fight Worn Everlast Shorts.” The bidding starts at a million dollars. Even if I had the money, I wouldn&#39;t pay that much for someone&#39;s sweaty shorts. That&#39;s because I don&#39;t perceive the value in owning them, regardless of the owner/user. But there are entire industries thriving on perceived value, aren&#39;t there?</p><p>Of course, if I could get it for a million and sell it for a million and a half, that then becomes a vehicle of wealth, which is a different matter. What it is NOT is of any value to me whatsoever, intrinsic or otherwise. So I&#39;m not going to buy it, whether it&#39;s a million dollars or one dollar. In fact, I&#39;d probably spend a hefty amount on security, maintenance, and such, essentially making it even pricier.</p><p>Stocks are vehicles of wealth, so even though I can&#39;t see myself valuing Ali&#39;s shorts at 33,333 times the price of a regular Everlast pair that retails for $30, I&#39;ll buy it as long as I have the confidence that someone else will value it even higher in the future. Heck, I&#39;d even buy the $30 pair if I can sell it for $45.</p><p>Drawing a parallel to PLTR, if you look at its price to adjusted forward earnings multiple of +180 or its price to forward book value multiple in the mid-30s (don&#39;t even go near the TTM multiples!), you&#39;d be tempted to stay away. It&#39;s like Ali&#39;s million-dollar shorts. But if you look at it as a vehicle of wealth, you&#39;ll realize that there are people willing to pay the $110+ per share — and possibly a lot more — for a stock that was once not even worth $7.</p><h2 id=\"id_1305232249\">Final Thoughts on Risk</h2><p>By its nature, PLTR is a risky investment. Although I don&#39;t put much stock in valuing such companies, the market certainly does. The more these valuations are stretched, the greater the chances of massive correction. Look at what happened to Nvidia Corp. (NVDA) shares when the news of DeepSeek (DEEPSEEK) broke, and you&#39;ll see that this is true.</p><p>The same could happen if PLTR misses on revenue expectations from Street analysts in the next quarter, or the next, or the one after that.</p><p>That&#39;s why I believe it&#39;s a positive that management has guided cautiously for FY 2025. I think 31% is lowballing it, considering the contracts pipeline and the strong momentum of revenue recognition on the back of that ample supply.</p><p>Finally, I&#39;d like to reiterate that my Strong Buy recommendation is contingent on the use of leverage to boost PLTR&#39;s unrealized gains over FY 2025. I&#39;ll detail the process in my very next article. See you then!</p></body></html>","source":"lsy1728464409321","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Palantir: Buy On Q4 Bump, But Mind The Caveat</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nPalantir: Buy On Q4 Bump, But Mind The Caveat\n</h2>\n\n<h4 class=\"meta\">\n\n\n2025-02-08 09:20 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4756055-palantir-buy-on-q4-bump-but-mind-the-caveat><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryPalantir Technologies Inc. has shown strong price action post-earnings, with significant QoQ and YoY growth, suggesting a continued rally through FY 2025.PLTR's conservative guidance for FY ...</p>\n\n<a href=\"https://seekingalpha.com/article/4756055-palantir-buy-on-q4-bump-but-mind-the-caveat\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"PLTR":"Palantir Technologies Inc."},"source_url":"https://seekingalpha.com/article/4756055-palantir-buy-on-q4-bump-but-mind-the-caveat","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1130728137","content_text":"SummaryPalantir Technologies Inc. has shown strong price action post-earnings, with significant QoQ and YoY growth, suggesting a continued rally through FY 2025.PLTR's conservative guidance for FY 2025 sets the stage for potential revenue growth beyond the 31% target, driven by robust U.S. commercial and government segment momentum.Despite high valuations, PLTR's revenue growth and minimal debt make it a compelling investment, especially when paired with the GraniteShares 2x Long PLTR Daily ETF (PTIR).Leveraging PTIR with PLTR can maximize gains during bullish rallies, doubling returns and increasing margin of safety, albeit with higher risk.Palantir Technologies headquarters campus exterior view in Silicon Valley. - Palo Alto, California, USA - 2019Michael ViIt's always a good sign when companies report QoQ growth figures alongside YoY numbers. It means they're confident of ongoing gains in the near term. And when you combine that with investors who are more than ready to reward that kind of growth, what you typically see is strong price action on earnings reports. Palantir Technologies Inc. (NASDAQ:PLTR) fits that description to a tee, so it is only natural for a blowout fourth quarter report to result in stronger-than-normal price action post earnings.SASAWe've seen this in action over the past two periods between the Q2 and Q4 2024 reports. See how the price action became stronger with each beat? I also believe the company is guiding conservatively for FY 2025. As a result, this should set it up for a continued rally through the full fiscal, and we should see some considerable gains made after Q1 2025 if my hunch is correct and management posts a strong YoY growth rate. The higher it is above the 31% full-fiscal guidance level for every quarter between now and then, the greater the chances that PLTR will end FY2025 at well over the guidance figure of $3.75 billion (which is 31% above the FY 2024 figure of $2.87 billion).That's essentially my Strong Buy thesis, but in addition to buying PLTR or adding to your current position, it's prudent to prepare to deal with the downside risk at these elevated valuations. With this article, I'll build my case for PLTR, and in a subsequent piece, I'll introduce an interesting leveraged ETF that you should definitely consider pairing with PLTR: the GraniteShares 2x Long PLTR Daily ETF (PTIR).In fact, my Strong Buy rating is contingent on having this pairing in place.Here's a quick taste of what's in store. Over the period between September 3, 2024, when the fund was incepted, and today, February 4, 2025, as I write this, the total return on PLTR compared to the TR on an investment in PTIR was what you see in the graph below.ChartData by YChartsInteresting, right? First, let me set up the strategy with a full discussion of why I'm very bullish on Palantir Technologies.The Palantir Bull CasePLTR investors already know the headline numbers for Q4 2024, but a quick recap should help set the tone for my thesis.What Palantir Did in Q4 2024Top-line growth in Q4 was, in many ways, a vindication for long-term bullish investors who were forced to see PLTR go through troughs as low as well under $7 a share toward the end of FY 2022. That was a time when revenue growth rates were on the decline, moving from 26% in the June 2022 quarter all the way down to 12.75% the following year.SASAGrowth has returned to PLTR forcefully since that time, and these same investors who were looking with dismay at single-digit share prices are now reaping the reward for their patience through the worst of it. And what a reward! The moment the market saw the 36% YoY and 14% QoQ jump in total revenues, it immediately rewarded the stock with a 24% price boost.SAYou might say at this point that such growth was unexpected, but try looking at it from another perspective: Street analysts seemed to be getting their revenue growth estimates more and more wrong since that June 2022 quarter I referred to earlier. Bar the temporary dip in Q2 and Q3 of 2023, the beats kept coming it stronger and stronger until it hit over 6% in Q4.SAIs it any wonder, then, that the highest-ever surprise beat of 6.65% led to the massive 24% price increase? Well, some might say it was excessive, and they could be right. However, I look at it a little differently. The market isn't necessarily rewarding current performance; I believe it's rewarding future performance based on elevated forward expectations. Not necessarily a bad thing in and of itself, but it does step up the risk element quite a bit.Author, from SA DataTo elaborate on that point about Street estimates growing increasingly off the mark, look at the graph above. Read right to left, the blue line shows how analysts have lost their ability to accurately predict Palantir's future revenues. The red bars show how many millions of dollars were added each quarter to the top line. Note the fair amount of seasonality in revenue growth, with Q4 usually being their strongest quarter. Palantir is now expected to post Q1 revenues of $869.27 million, but you can already see Street analysts lining up to revise their estimates upward.Per my reckoning, analysts are now trying to beat PLTR at its own game by pushing the estimate for Q1 2025 up to 37% YoY, which is what their expectation of $869.27 million represents. Q1 generally being PLTR's weakest quarter, it could go either way, but I'm betting on the company to crush that estimate.Where's This Strong Growth Going to Come From?To support my claim, let's look at the drivers underlying such strong growth. I believe we're just getting started on this new path.The first driver of growth is the company's RDV, or remaining deal value. It's more popularly known as remaining performance obligations or RPO, and it is the dollar value of contractual obligations that have yet to be delivered. These are not random projections of TAM or any other kind of estimate. They are hard benefits that will be recognized in the books in future dates. Unless PLTR is unable to deliver, a client reneges on a contract, or there are reductions in the pre-negotiated pricing, it's almost a guaranteed revenue item. The only variable here is the specific quarter in which these revenues will be realized.PLTR reported an RDV of $1.79 billion for its U.S. Commercial segment, so if that's fully converted into reported revenues over the next four quarters, it already covers 48% of the $3.75 billion guidance for FY 2025. That's just from the U.S. and just the commercial segment. And with TCV or total contract value reported at $803 million for this segment, the deals now represent a deluge that just needs near-flawless execution — another risk, you might say, but execution where Palantir's management excels. This will be the primary growth driver for FY 2025.The second growth engine for PLTR is its U.S. government segment revenues. These “only” grew 45% YoY and 7% sequentially, rather than the U.S. commercial segment's 64% and 20% YoY and QoQ, respectively, so I think 2025 is the year that commercial overtakes government in PLTR's U.S. market.Government revenues are typically lumpy and slow-growing, and the 7% QoQ figure validates this. However, the macro situation is now very favorable to U.S. AI companies like Palantir. According to Wedbush's Dan Ives:As Project Stargate takes hold this is bullish for the likes of Palantir (PLTR)...Even though PLTR is not a direct beneficiary of the $500 billion planned budget for Stargate over the next 5 years, its software strengths and the sheer data volumes it handles will, in my opinion, position it as a significant participant.So, we have two major growth drivers on the home front, with overseas revenues offering some padding. Overall, the 29% YoY growth rate for FY 2024 is the highest we've seen in the past three years. Set against those strong growth drivers and macro tailwinds, you can see why I think a 31% revenue growth guidance for FY 2025 is conservative.Why Am I Not Looking at Shareholder Equity or Bottom-Line Profitability?Although PLTR's bottom line is extremely healthy now compared to just three years ago, when it was still in the red, I don't think this is something investors should be concerned about — at least for now. Net income and EPS are no doubt a good indication of a business's ability to plow back cash into growing the business, but this would only worry me if operating cash flows were also negative. They haven't been negative since FY 2021, and even net income has turned positive over the past two years.As a result of this improved profitability, there's some amount of retained earnings deficit reduction happening over the past couple of years, which is a good thing. Far more important, though, is the company's ability to keep growing the operating expenses that directly contribute to revenue growth. If PLTR is making a dollar in revenue and spends that whole dollar to generate a dollar-thirty in the next fiscal year, I'm okay with that. Why? Because revenue growth is what excites investors more than profitability, so a dismal EPS doesn't hurt me if the stock price appreciates by five, ten, or twenty percent every year. I don't get any benefit from a higher EPS unless it translates to a higher share price over time; I DO get a benefit from higher revenues over time because the market will inevitably increase the value of my shares.As a very loose parallel, look at what's happening with Apple (AAPL) right now. AAPL revenue growth is down to under 3% YoY as of the TTM period as well as FY 2024. That's when EPS matters. If earnings growth rates were positive, they may have helped offset the lackluster topline growth, but they're not, so they haven't. The result is a loss of investor confidence, and it reflects directly on share price.AAPL Share Price YTD (SA)But that's a story for a different article, where I'll continue with my ongoing bearish Apple narrative.As for PLTR, I think it's a good thing that the company has used equity issuance and SBC dilution to grow its business to this level because that means little to no debt on the books. Moving forward, the company's new-found profitability should increasingly lower its current retained earnings deficit of about $5.2 billion, while still allowing the strong cash flows to keep the revenue needle moving in the right direction.Data by YChartsNow for the Elephant in the Room — Valuation!PLTR's valuation in one word: ridiculous! But allow me to put that in the right context. You've seen why I didn't go much lower than the operating level to look at this company's health, so I don't really put much stock in price to earnings or price to book for companies that are growing revenues in the double digits even after they hit billions in annual sales. PLTR is now in that league of extraordinary stocks.Yes, some metrics are critically important to me, such as quarterly cash balances, debt levels, operating cash flows, and many others. Others, not so much because at the end of the day, the value of a company is exactly what the market thinks it should be. I'm not a proponent of the efficient market hypothesis, which is still a hypothesis, by the way, but apart from the market price, there's really no way to pin valuation down to an intrinsic value or a relative multiple.Let me drive home that point. On February 7, Sotheby's is auctioning Muhammed Ali's “‘Thrilla in Manila’ Fight Worn Everlast Shorts.” The bidding starts at a million dollars. Even if I had the money, I wouldn't pay that much for someone's sweaty shorts. That's because I don't perceive the value in owning them, regardless of the owner/user. But there are entire industries thriving on perceived value, aren't there?Of course, if I could get it for a million and sell it for a million and a half, that then becomes a vehicle of wealth, which is a different matter. What it is NOT is of any value to me whatsoever, intrinsic or otherwise. So I'm not going to buy it, whether it's a million dollars or one dollar. In fact, I'd probably spend a hefty amount on security, maintenance, and such, essentially making it even pricier.Stocks are vehicles of wealth, so even though I can't see myself valuing Ali's shorts at 33,333 times the price of a regular Everlast pair that retails for $30, I'll buy it as long as I have the confidence that someone else will value it even higher in the future. Heck, I'd even buy the $30 pair if I can sell it for $45.Drawing a parallel to PLTR, if you look at its price to adjusted forward earnings multiple of +180 or its price to forward book value multiple in the mid-30s (don't even go near the TTM multiples!), you'd be tempted to stay away. It's like Ali's million-dollar shorts. But if you look at it as a vehicle of wealth, you'll realize that there are people willing to pay the $110+ per share — and possibly a lot more — for a stock that was once not even worth $7.Final Thoughts on RiskBy its nature, PLTR is a risky investment. Although I don't put much stock in valuing such companies, the market certainly does. The more these valuations are stretched, the greater the chances of massive correction. Look at what happened to Nvidia Corp. (NVDA) shares when the news of DeepSeek (DEEPSEEK) broke, and you'll see that this is true.The same could happen if PLTR misses on revenue expectations from Street analysts in the next quarter, or the next, or the one after that.That's why I believe it's a positive that management has guided cautiously for FY 2025. I think 31% is lowballing it, considering the contracts pipeline and the strong momentum of revenue recognition on the back of that ample supply.Finally, I'd like to reiterate that my Strong Buy recommendation is contingent on the use of leverage to boost PLTR's unrealized gains over FY 2025. I'll detail the process in my very next article. See you then!","news_type":1},"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":17,"commentSize":1,"repostSize":0,"favoriteSize":3,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.30.2","shortVersion":"4.30.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1130728137"}