The technology company plunged following a revenue beat, although it came at a price with SBC rising, and a lowered 2021 growth outlook.
Palantir Technologies announced their December earnings on Tuesday, revealing revenue that topped estimates, likely building upon new contracts with governments and large companies such as b.p. and IBM.
For 2020 Q4, Palantir reported an 8 cent per share loss, or $148.3 million, including stock-based compensation (SBC), or GAAP rules. This fell below estimates for a 2 cent profit (-0.08 vs 0.02), although that estimate did not include stock-based compensation.
Palantir made $322 million in revenue, marking a 40% growth YoY, a large gain over the estimates’ average of $300.7 million. That means that although Palantir fell on earnings, they beat revenue estimates by 7%. In my opinion, that was great for the stock, although it seems that over 170 million shares say otherwise.
Palantir, the company run by CEO Alex Karp, and brought to fruition by PayPal co-founder Peter Thiel, was hit with a 13% loss in the company’s stock price on Tuesday, pushing the stock to almost 40% below its all time high earlier this year. The company’s seen some issues recently with its stock, buoyed by an increasingly high valuation with no real profits yet.
Volume was over 176 million shares traded on Tuesday, a +179% change when compared to the average. While I personally thought that earnings were well off, there were two noticeable things that likely caused the mass sell-off:
1) Lowered 2021 revenue estimates | Palantir expects a 30% growth for 2021, a big slowdown from 2020’s 47% growth, a massive number for a company with, now, over $1 billion in annual revenue. It’s also lower than what analysts expect, at 30% compared to an estimated 31% gain to $1.41 billion.
2) Insane stock-based compensation | Most of the losses for Palantir resulted from stock-based compensation, the way that Palantir gave bonuses and rewards to employees over cash. It gives employees slight pieces of equity in the company, effectively serving as credit. Palantir paid over $241.8 million in SBC during Q4, which without it, would’ve resulted in a $94 million profit, which would’ve blown out expectations.
Palantir’s revenue has been dominantly government sources for quite a while, with that trends continuing into Q4 2020. Government revenue jumped a full 85% to $190 million, beating estimates of $164.6 million. That’s against commercial revenue’s small growth of 4% to $132 million, which fell short of estimates towards $136.7 million.
Government revenues likely grew from multiple countries’ reliance on Palantir’s technology to more accurate track data points for the coronavirus pandemic, which actively resulted in several multi-million dollar contracts for the company. Shareholders hope for that revenue to continue afterwards however, even though it likely won’t.
The company’s been signing contract after contract with big names throughout the world, with notable examples such as the following:
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These contracts have helped push Palantir’s price up over 300% since its direct listing back in late 2020. The stock’s still up 35% this year, as pre-drop prices were up to almost $40, still giving stockholders some gains to hold onto.
The company’s still got a bright future ahead of itself, with some notable recent growth into some more commercialized markets, such as with b.p and PG&E in the energy industry, and with IBM in the technology industry. There’s lots of long-term potential for the stock, even if the company’s currently worth over $50 billion. That’s why it’s one of my top holdings currently.
As a heads up, revenue from contracts such as all of the previously mentioned, won’t appear until Q1 2021 results, as the money only starts flowing a few months after the contract was initially announced. That means that Palantir’s likely going to see an absolutely massive Q1 growth, even if they’re downplaying the possibility.
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