원문 보기
Wow, earnings season is always brutal. Palantir's earnings call was earlier today and even though they beat analyst expectations for earnings per share and revenue, the stock dropped close to 10% right at market open. As of yesterday's market close, Palantir is still ARK Invest's 13th biggest position overall with over $850 million dollars in it.
We'll know tomorrow whether or not they bought this 10% dip or if something in their long-term outlook on the stock has changed. I'm trying to cover a few of my high conviction stocks more closely, so in this episode I'll give you the highlights of Palantir's earnings call and whether my outlook on the stock has changed.
Spoiler alert: it hasn't. BUT some of the financials did change so we should talk about them. Your time is valuable, so let's get right into it, starting with the good stuff. Palantir's total revenue for the quarter grew by 36% year over year to $392 million dollars. Commercial revenue growth has also grown by that amount, which is great to see.
Commercial revenue in the US specifically more than doubled year over year, so they're getting a lot of business on the commercial side here at home. To me, this is great news because one of the biggest complaints about Palantir as an investment is their reliance on government contracts. Seeing their US commercial revenue double should alleviate at least some of those concerns.
The customer count on the commercial side grew 46% quarter over quarter. Not year over year, quarter over quarter. Their total commercial customer count has gone up by a whopping 135% since the start of the year. They netted more new customers this quarter than in the previous 2 quarters combined. The other big complaint about Palantir is that it's enterprise software, so its total addressable market is limited to agencies on the government side and big Fortune 500 type companies on the commercial side.
In addition to being a flexible platform that works with everything from cryptocurrencies and pharmaceuticals to robots racecars, investors want to see that Palantir's Foundry is a scalable platform that can work with companies that have dozens of employees, not just thousands. As I said, their commercial revenue grew by 37% year over year.
Their customer count growing faster than their commercial deal value tells me that they're landing smaller commercial clients, which is exactly what we want to see because it means they're starting to move down-market to medium-sized businesses. That increases their total addressable market. Palantir has a land-and-expand model, meaning their average revenue per existing customer goes up over time.
In fact, the average revenue on their 20 biggest customers is up 35% year over year. That's huge. So it's also great to see them take that to its logical conclusion and help businesses build on top of Foundry from the beginning, which means their revenue can grow alongside these customers from inception.
This also makes Palantir very sticky because if a business builds their entire data pipeline on top of Foundry, it'll be very costly and time-consuming to switch to different software. In my opinion, all of these are positive things associated with Palantir moving into markets with medium-sized businesses, even if this causes their average size per deal to go down in the short term.
They closed 8 fewer deals over 1 million dollars than last quarter, but roughly the same amount of bigger deals over 5 million dollars as last quarter. Their total remaining deal value grew by 50% to 3.6 billion dollars. That means they have 3.6 billion dollars in signed business they have to execute on even if they don't sign one more new contract.
For example, at the start of the quarter, Palantir announced that it has been selected by the U.S. Army’s Program Manager for Intelligence Systems and Analytics to deliver the Army’s Intelligence data fabric and analytics foundation for the Capability Drop 2 (CD-2) program. Palantir was selected to progress to the next phase of the Army’s competitive $823 million dollar I D I Q contract.
I D I Q stands for indefinite-delivery, indefinite-quantity. Palantir will deploy the Palantir Gotham Platform to support Army Intelligence users worldwide with a globally federated Intelligence data fabric and analytics platform spanning multiple security classifications. So, let me point out two things here.
One, having one platform that supports a worldwide list of Army users that spans multiple classifications is a very, VERY difficult challenge, because different areas of the Army have different ways of handling their access lists, networks, data, and have a wide variety of analytics tools. You'd think everything would be standardized everywhere and work the same way, and that's probably true on paper, but it never works that way in practice.
Plugging the U.S. Army's Intelligence Systems and Analytics into Palantir's Gotham will bring this part of the Army a lot closer to having that unified, consistent view of all of their data, which is obviously super important when you're talking about multiple teams stationed around the world. Second, I'm willing to bet that Palantir was selected at least in part because of Apollo, the platform that powers their other platforms.
Apollo sits between Palantir's other applications and the underlying infrastructure they run on, and they spent a good amount of their earnings call talking about it. Apollo lets Palantir push the right updates to the right clients at the right times, even if the client's machines are sitting on classified networks or networks that don't touch the internet.
I cannot emphasize enough how big of a market Apollo unlocks for Palantir that other software-as-a-service providers simply cannot touch. Apollo is what allows Palantir to be one of five companies authorized for Mission Critical National Security Systems (Impact Level 5) by the U.S. Department of Defense.
The other four companies are Oracle, Microsoft, Project Hosts, and DISA - the Defense Information Systems Agency. This is a tiny list. Think about how sticky that makes Palantir on the government side as well -- if this part of the US Army decides they want to try a new platform, imagine the amount of infrastructure and software they'll have to change to do it, just like the smaller companies on the commercial side.
I'm excited to track the progress of the IDIQ program and Capability Drop 2 over time because the news on these programs could highlight more and more differentiators that allow Palantir to get in with other big companies and programs over time. So, why did the stock drop 10% after this awesome earnings call?
Well, for two pretty valid reasons actually. One thing people are pointing to right now is Palantir's slowing revenue growth rate. Government revenue grew by 34% year over year but last quarter, it grew by 66%. I'm not saying I have the answer, but let me point out two big factors here. People graduate school, including grad school, in May and typically take the summer off before starting their careers.
So, the government typically makes a lot more new hires in July and August, which eats into their budget. Speaking of government budgets, the other thing to consider is that the government's fiscal year is the start of October to the end of September, not from January to December. So, quarter 3, which runs right up to the end of September, could be adversely affected by these end-of-budget type issues.
I'm not saying that's the answer, but I am saying let's see if growth on the government side stays down next quarter, which would be during the new fiscal year on the government side. The other thing people are pointing to is operating margin, which is Palantir's profit after operational costs like wages.
Palantir guided to an operating margin of 22%, where analysts expected 24%. 22 over 24 is about an 8% difference, which is roughly the same amount the stock price has dropped by. Palantir hired a lot of people this year. They drastically increased marketing their spend this year. The amount of new sales they plan on making per existing customer is expected to drop next year, which makes sense -- at some point, every customer won't have any new business for Palantir that they didn't already get.
So now the pressure is on Palantir to turn those extra marketing and salary costs into even more profits from NEW customers as their biggest old ones get saturated. One other thing I want to point out is Palantir's stock-based compensation. Stock-based compensation is down about 40% using year-to-date numbers from this year versus 2020.
For just the quarter, it's down from 847 million dollars in Q3 of 2020, to 185 million dollars in Q3 of 2021. That's about an 80% drop. Compensating employees with stock is a great way to keep their incentives aligned with shareholders AND to keep them motivated to perform, so we don't ever want to see this number hit zero, but it's great to see it's much lower than before.
Okay, with all that context, here's why I think the stock price dropped. This is the big question at the heart of the bear thesis on Palantir: will all of this hiring, marketing spend, and stock-based compensation continue to eat into their profits as they start to run out of new work from their biggest existing clients?
Will they be able to find new clients of the same size, especially on the government side, or are they going to have to keep moving down the commercial markets and winning a lot more but smaller clients as a result? I think those questions make for a really fair, well-defined bear thesis that investors should keep tabs on over time.
Comment below or tweet me at Ticker Symbol YOU with your thoughts on Palantir's earnings call. What do you think about their relative growth rate and margins? Are you surprised that their stock shot down 10% even though they beat analyst expectations for earnings per share and revenue? As for me, I'm excited to look at ARK Invest's trading data tomorrow morning to see if Cathie Wood bought this dip.
I'm just as bullish on the company because I do think they'll be able to land clients in a wide variety of new markets like connected automotive, industrial robotics, and even cryptocurrency and other services built on blockchain technology. Not only that, but I believe that Palantir's Foundry platform will be able to scale down to medium-sized businesses, as they've shown us with the Foundry for builders program.
That's why I bought the dip myself and Palantir is now the 5th biggest position in my 100,000 dollar portfolio on Public dot com. I'm building that portfolio from scratch to compete directly with ARKK, ARK Invest's flagship innovation fund, which also holds a lot of Palantir stock. I hope to run this investing project for the next 5 years, or as long as it takes for me to admit defeat.
If you're interested in jumping on that wild ride with me, consider liking this video and subscribing to the channel with all notifications turned on. That way, you'll be the first to know when I come out with more coverage like this, as well as exactly what I'm putting in that portfolio each month.
I've actually invested about $25,000 of it already, which has been especially exciting during this choppy earnings season. So, if you'd like access to those trades as they happen instead of waiting for my monthly portfolio update, consider supporting the channel as an Insider-tier Patron on Patreon or channel member right here on YouTube.
And if you're interested in learning more about Palantir's Foundry platform and how they could scale their business on the commercial side, I'm organizing and putting out a lot more written content on it over at Public dot com, an investing social network that I feel really brings together the best of both worlds.
On the investing side, Public dot com is free to use with no account minimum to get started, doesn't charge fees for standard trades, and allows you to buy slices of stocks for as little as one dollar. Public doesn't participate in Payment for Order Flow, meaning they don't sell your trades to market makers or other trading firms.
That's really important to me. I'm just as excited about Public's community, where I've been able to exchange investment ideas with thousands of other like-minded, long-term focused investors. Public hosts live town halls with CEOs of publicly traded companies, as well as give creators like me tools to create and share meaningful investing content, like my articles on Palantir's investments and their Foundry for Builders program.
So, if you want to check out even more of my Palantir content or just want to know when I buy the stock myself, consider joining the hundreds of people already following me on Public dot com. I'll leave a link to my two Palantir articles in the description below. AND, whether you're looking for a new home for your own portfolio or just want to support the channel, you can go to public dot com slash ticker symbol you and you'll receive a free slice of stock worth up to $70 when you fund your account.
That's a win-win if I ever heard one. I'll leave a link to that exclusive offer for you in the description below as well. Your support makes this channel and all of these investment projects possible... and that means the world to me. Thanks for watching and until next time, this is Ticker Symbol You.
My name is Alex, reminding you that the best investment you can make... is in you.
댓글 0