Palantir Stock's Q2: The Buyback Is Very Bearish

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Palantir Stock's Q2: The Buyback Is Very Bearish

seekingalpha2023-08-08

da-kuk Palantir Technologies (NYSE:PLTR) just reported Q2 results. I recently previewed PLTR's Q2 earnings release, highlighting three reasons why investors should sell the stock prior to the earnings...

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I recently previewed PLTR's Q2 earnings release, highlighting three reasons why investors should sell the stock prior to the earnings...</p>\n\n<a href=\"https://seekingalpha.com/article/4625242-palantir-stocks-q2-buyback-is-very-bearish\">Source Link</a>\n\n</div>\n","source":"seekingalpha","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 Stock's Q2: The Buyback Is Very Bearish</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 Stock's Q2: The Buyback Is Very Bearish\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-08-08 17:49 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4625242-palantir-stocks-q2-buyback-is-very-bearish><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>da-kuk Palantir Technologies (NYSE:PLTR) just reported Q2 results. I recently previewed PLTR's Q2 earnings release, highlighting three reasons why investors should sell the stock prior to the earnings...</p>\n\n<a href=\"https://seekingalpha.com/article/4625242-palantir-stocks-q2-buyback-is-very-bearish\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4543","symbol_name":"AI","start_time":0,"source_url":"https://seekingalpha.com/article/4625242-palantir-stocks-q2-buyback-is-very-bearish","article_id":"2357104742","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1464561797/image_1464561797.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2357104742","pubTimestamp":1691488176,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"da-kuk Palantir Technologies (NYSE:PLTR) just reported Q2 results. I recently previewed PLTR's Q2 earnings release, highlighting three reasons why investors should sell the stock prior to the earnings","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4543":"AI","BK4547":"WSB热门概念","BK4585":"ETF&股票定投概念","BK4588":"碎股","BK4023":"应用软件","PLTR":"Palantir Technologies Inc."},"translate_title":"帕兰蒂尔股票的Q2：回购非常悲观","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"PLTR":1},"content_text":"da-kuk Palantir Technologies (NYSE:PLTR) just reported Q2 results. I recently previewed PLTR's Q2 earnings release, highlighting three reasons why investors should sell the stock prior to the earnings release. In this article, we will break down the report's pros and cons for the company and stock in light of these three reasons and then offer our updated outlook on PLTR stock. PLTR Stock Q1 Positives We will start with the good news. The company delivered non-GAAP EPS and revenue that were in-line with analyst expectations. The company delivered its third consecutive quarter of GAAP profitability and continues to expect to remain profitable on a GAAP basis moving forward. Moreover, the company continued to grow, with year-over-year revenue growth of 13%, headlined by fairly strong U.S. commercial revenue growth of 20%. U.S. Government revenue growth was also in the double-digit arena at 10% year-over-year. Perhaps most encouraging, non-U.S. Government revenue growth actually outpaced U.S. Government growth during the quarter, coming in at a blistering 31% during the quarter. That said, it has become such a small part of the overall government business that it will need to sustain this strong growth rate moving forward to really make a strong impact on the overall government growth rate long-term. Moreover, government growth tends to be quite choppy, so one quarter is far too small of a sample size to get excited over. Still, this was a promising sign that they are beginning to make headway with international government clients. Finally, CEO Alex Karp maintained in his shareholder letter that: The scale of the opportunity that lies ahead has increased significantly in recent months. And we intend to capture it. As such, management clearly remains very bullish on the long-term growth potential from its involvement in the artificial intelligence space. PLTR Stock Q2 Negatives That said, there were also some noteworthy negatives in the Q2 result. First and foremost, the 13% headline revenue growth number appears to continue the deceleration of revenue growth and reveals that the much-hyped tailwind from artificial intelligence has yet to hit PLTR's sales sails. Moreover, PLTR's main growth engine - its U.S. commercial business - saw growth decelerate to 20% year-over-year from 26% year-over-year growth in Q1. U.S. Government revenue - its next best growth engine - also saw growth decelerate considerably from 22% year-over-year in Q1 to just 10% in Q2. Overall revenue growth decelerated from 18% year-over-year in Q1 to 13% in Q2. Moreover, full year guidance, while raised from previous levels, still implies that accelerating revenue growth from artificial intelligence is a ways off. Alex Karp can proclaim all he wants that artificial intelligence is \"significantly\" increasing their growth opportunity, but at the end of the day he has yet to provide any specifics on how this increased opportunity will translate to the massive acceleration in revenue growth that is necessary to justify where the stock is currently trading. Moreover, the growth in the international commercial business remains quite weak, posting a meager 4% year-over-year growth rate in Q2. Until this rebounds consistently, PLTR is going to be significantly limited in how much of their projected total addressable market they can truly capture. Last, but not least, the most noteworthy takeaway from the quarterly update was that PLTR's board of directors has approved a $1 billion stock buyback authorization. Management justified it by saying that they have $3.1 billion in cash and cash equivalents on hand as of June 30th and remain a cash generative company. While this amount of cash on hand is certainly a great thing and many longs will likely appreciate buybacks as a way to counter the dilution narrative coming from stock-based compensation, in our view, this is a bearish indicator for PLTR stock for the following reasons:  PLTR is currently being valued by Mr. Market as a high growth innovative disruptor, not a cash cow value stock. As a result, it should be using all of its excess cash flow to invest in high returning research and development projects that will enable it to capture more of this \"significant opportunity\" ahead of it in artificial intelligence that the CEO speaks of. The fact that it is instead using this cash to supposedly buy back stock is concerning in that it betrays the rapid growth narrative that management is trying to push. It is important to keep in mind that PLTR's announcement makes clear that this does not signal in any way shape or form an intent to actually buy back stock. Instead, it could very well turn out being nothing more than another publicity stunt to try to pump the stock further and make up for disappointing headline growth numbers:  The timing and the amount of any repurchased common stock will be determined by Palantir's management, based on factors including achieving an additional quarter of profitability, amongst others. The repurchase program is expected to be executed through open market purchases (including pre-set trading plans, subject to any applicable cooling-off periods) or other transactions in accordance with all applicable securities laws. The repurchase program has no mandated end date, no minimum purchase commitment, and is dependent upon management's assessment of a variety of factors, including but not limited to business and market conditions, and corporate and regulatory requirements, in accordance with all applicable securities laws. The repurchase program does not obligate us to repurchase any particular amount of common stock and may be suspended or discontinued at any time at Palantir's discretion without prior notice, subject to all applicable securities laws. Third, as Warren Buffett has stated in the past, buybacks are only truly value accretive if done at valuations that make sense. Given that PLTR has been a massive net issuer of stock at prices that were less than half where they are trading today, they should be issuing a special dividend instead of buying back stock at these prices. To use public shareholder money today to buy back stock at more than twice the price that they issued it to insiders mere months ago is a very irresponsible way to allocate capital and arguably unethical: Data by YCharts Investor Takeaway PLTR continues to grow, continues to deliver GAAP profitability, continues to hype up the \"significant opportunity\" from growing artificial intelligence product demand, and is now even saying it might buy back a bunch of its stock. However, the topline growth continues to decelerate, international commercial growth remains anemic, forward revenue growth guidance remains unimpressive relative to where the stock price trades, and management's decision to potentially buy back a bunch of stock at prices over two times where it was when they issued it to insiders mere months ago is an appallingly bad use of shareholder capital.  For these reasons, we remain bearish on the stock's potential to deliver outsized returns over the long-term from current prices.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"hasMoreComments":false,"newsSizeData":{"likeSize":4,"commentSize":0,"repostSize":1,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false}}