PLTR Added: Scout Team

I started a small Scout Team position in PLTR today. The company reported Q1 2024 on May 6 and has since sold off rather vigorously. Why the rather vigorous sell-off? Well…despite beating expectations, aggressively adding customers, and raising guidance market fans were expecting more. So what does PLTR do anyway?

Here is what Seeking Alpha says about PLTR:

  1. Government Stuff:

The company provides Palantir Gotham, a software platform which enables users to identify patterns hidden deep within datasets, ranging from signals intelligence sources to reports from confidential informants, as well as facilitates the handoff between analysts and operational users, helping operators plan and execute real-world responses to threats that have been identified within the platform.

…and…:

  1. Commercial Stuff:

It also offers Palantir Foundry, a platform that transforms the ways organizations operate by creating a central operating system for their data; and allows individual users to integrate and analyze the data they need in one place. In addition, it provides Palantir Apollo, a software that delivers software and updates across the business, as well as enables customers to deploy their software virtually in any environment; and Palantir Artificial Intelligence Platform (AIP) that provides unified access to open-source, self-hosted, and commercial large language models (LLM) that can transform structured and unstructured data into LLM-understandable objects and can turn organizations’ actions and processes into tools for humans and LLM-driven agents.

Here is what Palantir says about Palantir:

This is gonna be harder than I thought: Palantir offers AIP (Whatever that is) that is essentially an Ontology that generates, runs, drives and otherwise coordinates " A decision-centric system at the heart of AIP that integrates AI with enterprise data, logic, and action."

Note 1). On the PLTR website this explanation is followed by a spider web of interconnecting important looking/sounding stuff.

Maybe you better go look at it yourself:

So anyway…the current numbers on the company look like this:

Current Price: $21.39 Intraday
52 Week Range: $9.02 - 27.50
5 Day Momentum: Negative 8.87%
Market Cap: $47B +/-

Here is the Press Release for the May 6 Report:

https://seekingalpha.com/pr/19713637?source=content_type%3Areact|section%3Aearnings_summary|section_asset%3Aearnings_history|first_level_url%3Asymbol|button%3Apress-release

Q1 2024 Highlights

  • GAAP net income of $106 million, representing a 17% margin
    • Sixth consecutive quarter of GAAP profitability
  • GAAP income from operations of $81 million, representing a 13% margin
    • Fifth consecutive quarter of GAAP operating profitability
  • GAAP earnings per share (“EPS”) of $0.04
  • Adjusted EPS of $0.08
  • Revenue grew 21% year-over-year and 4% quarter-over-quarter to $634 million

That doesn’t sound all that bad - however, part of the equation on an investment in PLTR revolves around how the company was going to transition from being primarily dependent upon Government Agencies adopting their stuff to regular ole non-military/spy people, corporations and various others - or something like that. So - when looking at this Qtr how’d they do? Here be the Commercial Highlights:

US commercial highlights

  • US commercial revenue grew 40% year-over-year and 14% quarter-over-quarter to $150 million
  • US commercial customer count grew 69% year-over-year and 19% quarter-over-quarter to 262 customers
  • US commercial remaining deal value (“RDV”) grew 74% year-over-year and 14% quarter-over-quarter
  • Commercial revenue grew 27% year-over-year and 5% quarter-over-quarter to $299 million

Now…maybe not the WOW investors were inspecting but not all that shabby either. At least from the cheap seats in my admittedly AIP/Ontology ignorance - such that that may be.

And the Government side of the business seems to be moving right along as well:

Government revenue grew 16% year-over-year and 3% quarter-over-quarter to $335 million

Yeah…but what about Customer Count?

  • Customer count grew 42% year-over-year and 11% quarter-over-quarter

Ok but what about the other stuff critical to QTRLY Reports enthusiasts?

Ok here is some of that stuff:

  • Adjusted income from operations of $226 million, representing a margin of 36%
    • Sixth consecutive quarter of expanding adjusted operating margins
  • Rule of 40 score of 57%
  • Cash from operations of $130 million, representing a 20% margin
  • Adjusted free cash flow of $149 million, representing a 23% margin
  • Cash, cash equivalents, and short-term US treasury securities of $3.9 billion

Of course there are always some Cons to QRTLY reports and there certainly is one in this one: Cash Flow Margin Compression?

You can find the CC Transcript here:

https://seekingalpha.com/article/4689922-palantir-technologies-inc-pltr-q1-2024-earnings-call-transcript?source=content_type%3Areact|section%3Aearnings_summary|section_asset%3Aearnings_history|first_level_url%3Asymbol|button%3Atranscript

Following the report the immediate fan reaction has obviously been to RUN AWAY - FLEE - SAVE YOURSELF!!! Which many investors have done as evidenced by the results over the last couple of days. In short - investors sold based on a single premise: The company report didn’t produce the BIG KABOOM revenue pop in the report and the Cash Flow Margin sucked a bit and certainly didn’t help - but - importantly, they did not revise Cash Flow Margins downward in their updated Guidance. All the report did was continue to make progress with the last 4 Reports featuring YOY Revenue Growth as follows:

20.79%
19.61%
16.80%
12.75%

In absolutely no High Growth investor’s playbook does YOY revenue growth of a puny little 20+ percent seem overly appealing - well…except for one.

All of which brings me to why I opened a small position:

The company is clearly an AI pure play - or at least it seems so to me and while the Valuation is high the current sell-off has made it much less so. Note that they raised full year guidance added new customers at a nice clip and the Commercial side is growing - no hyper growth but not too modestly either: all of which, at least to me, continues to stage the company for continued success with increasing potential albeit perhaps in small bites. And for a Scout Team player thats enough progress and potential for me.

Finally - a couple of post report articles:

PRO:

CON:

All the Best,
BDH Investing

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