To The Moon

If you've read my previous posts, you would have taken profits / closed some of your positions before the earnings call. As per usual, the share price of $Palantir Technologies Inc.(PLTR)$ took a massive dive after the earnings call. Similar to last quarter, graphs and information were purposely and tactfully removed. You can check out the Q2 2022 earning report here.

Financials

The total customer count increased from 277 to 304 (+10% this QoQ compared to the previous QoQ of +17%). PLTR only acquired 27 new customers this quarter compared to 40 last quarter. Since they have been actively hiring and expanding their sales team, I'm expecting new customer acquisition to be higher. What happened here?

Total Government Revenue Growth has slowed this quarter too (+16% Q1 to +13% Q2). The government sector accounted for 56% of PLTR total revenue, up from 54% last quarter. If PLTR wants to scale, we should see commercial revenue accounting for a larger portion of their total revenue.

Total Commercial Revenue Growth has also slowed YoY (+54% last quarter to +46% this quarter). Comparing this on a QoQ basis, the result is worse. There is only an increase of +2% this quarter, compared to +54% in the previous quarter.

% of government revenue out of total revenue increases from 54% to 56% QoQ, signifying that PLTR has slowed down in acquiring commercial customers.

The average revenue per top 20 customers remains relatively unchanged QoQ. Their top customers are not spending more. Furthermore, net dollar retention dropped from 124% in Q1 2022 to 119% in Q2 2022. Their existing customer base is spending lesser this quarter.

The deal closed increased from 208 to 234, an increase of 67% also showing signs of slowing growth. Furthermore, billings are only up 5% YoY. In fact, it's a decrease in QoQ from 490m to 396m in Q2 2022.

Total remaining deal value and remaining performance obligation remain stagnant despite more closings this quarter.

Palantir still has a strong balance sheet, with 2.4b cash on hand and 0 debt. They also expanded credit facilities to $950m which is undrawn. Having a strong balance sheet is good, but does it convert to higher growth in future quarters?

In Q1 2022 earnings call, PLTR is expecting government revenue to grow strongly in H2 2022. Let's see if this is the case going into Q3 2022.

Forward guidance

Q3 2022 Guidance

Revenue of 475m, only a 21% YoY increase; 0% QoQ increase. In the previous quarter, it was a 25% YoY expectation.

FY 2022 Guidance

We are expecting revenue of 1.9b for the year, which is only a 23% YoY growth (FY2021: 1.5b), a significant decrease from their previous guidance of 30% YoY.

Furthermore, they mentioned that they are presently not guiding beyond FY2022. I will be revising my model soon to account for this change in guidance.

Institutional Holdings

A decline in institutional ownership coincides with macroeconomic factors. The share price keeps getting lower after each earning due to a miss in EPS. For institutional ownership to increase, we will need to see the company start to be consistently profitable. As such, the share price of Palantir is subject to volatility in retail trading.

https://fintel.io/so/us/pltr

Macro Factors

Fundamentals for the company are alright. However, short-term-wise, there are potential red flags being observed. PLTR had its growth slowed this quarter, and potentially next quarter. However, they could be partly due to the macroeconomic factors over the past few months.

We saw the euro headed back to dollar parity last month, increasing the cost for European companies to engage PLTR. The cost of using PLTR services is already high and coupled with the unfavorable exchange rates, revenue tends to do worse than expected.

Many companies are also cutting their costs and spending. PLTR services are discretionary spending for businesses. They are not essentials like oil and raw materials. During this period of recession, it is expected that the revenue for PLTR to get hit and a slowdown will happen.

With inflation soaring globally, business revenue has been hit hard with many missed earnings. In this earning crunch, we should see the price of the stock market going down. To combat inflation, the FED needs to remove money from the economy. Potentially, we will see the interest rate continue to go higher into FY2023. PLTR has taken this into factor and thus guided for low/stagnant growth in Q3 2022.

Plans

In Q1 2022, the management has stated that we will see an increase in government revenue in H2 2022. I will be keeping a lookout for this. In addition, SBC has remained stagnant. I'd like to see SBC continue to go down. My only concern now is that they ramped up hiring and expansion of its sales team. Potentially, we could see SBC increasing going forward which I do not like. Also, food for thought, if we see an increase in sales headcount last over the past few quarters, are we supposed to see such stagnant guidance made by the management?

I will be amending my pricing model for PLTR and let you know if there are any significant changes.

Previously, using the bear case scenario, my DCF shows an implied PV of $8 which is around the current share price.

Right now, I'm staying on the sideline. I have not sold, nor am I going to buy the dip. I am very bearish on the market as a whole, expecting a reset on the economy in order to bring inflation and housing prices down.

If we ever get to $5. I'll start accumulating more positions in PLTR.

Disclaimer: I have positions in Palantir as of the date of posting this article. Do note this article is not a signal to buy or sell and should be treated for entertainment purposes only. I was probably drunk when writing this article. Please do your own due diligence when investing. This is NOT financial advice.

@TigerStars @CaptainTiger @MillionaireTiger 

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