Advisors in Focus- February 21, 2021

Palantir (PLTR) is named after a seeing stone in J.R.R. Tolkein’s mythical novels, The Lord of the Rings. Scholars and critics have debated the primary theme around the books about being as the struggle of good and evil, death and immortality and fate and free will. Perhaps the latter theme is more apropos for PLTR given the debate around data privacy.

Last week, shares of PLTR had a wild ride which explains how it ended up as the #2 most researched name by your clients last week. PLTR’s week included earnings, a lock-up expiration, high-profile 13F movements, and a vote of confidence from ARK Invest’s Cathie Woods (Leaving the low hanging fruit of ORK Invest alone!). All-told, shares would fall 29% in the first four sessions before finding support at $25 and rally back to close the week at $29.75. Dissecting the week will help financial advisors decide if they want to invest in the controversial name.

What does PLTR do? A fair question as it usually is explained with a wave of the hand and “they are in the cloud”. For those looking for greater shock value, the answer is PLTR is “a company that knows everything about you”. To wit, PLTR specializes in big data analytics around big government and financial institutions. This is data that is difficult to corral and therein lies the value for government and financial agencies.

Primary products include Palantir Gotham used by counter-terrorism analysts at offices in the United States Intelligence Community and Department of Defense. Palantir Metropolis is software for data integration, information management, and quant analytics used by hedge funds, banks, and financial service firms. Palantir Foundry integrates front and back-end office analytics to unlock data across hybrid cloud environments. This is the unit involved in the IBM announcement on February 8. 

It does not take a Masters in populist conspiracy theory to understand the concerns around a company that deals with data across the government, financial institutions, and the corporate sector. PLTR’s list of clients (CIA, DoD, FDA, Qatar to name a few) has raised red flags with lawmakers who requested the SEC take a look at PLTRs dealings. The debate around privacy will hang around like an albatross as long as the company remains public. But the conspiracy theories do not end there.

TrackStarIQ Data

Here are some highlights from Retail searches this week –

RankTOP STOCKS – BY Retail (Total Traffic) This Past WeekTickerTOP STOCKS- BY RETAIL (Surge Traffic) This Past WeekTickerTOP ETFs By RETAIL (Total Traffic) This Past Week Ticker
1Churchill Capital Corp IV Cl ACCIVHighcape Capital Acquisition Corp Cl ACAPASPDR S&P 500 ETFSPY
2Palantir Technologies Inc Cl APLTRImmunome IncIMNMARK Innovation ETFARKK
3Sundial Growers IncSNDLOsprey Technology Acquisition Corp Cl ASFTWInvesco QQQQQQ
4Storage Computer CorpSOSOEnergySolutions IncES1ProShares Ultra VIX Short-Term FuturesUVXY
5Sos LtdSOSGreenland Technologies Holding CorpGTECARK Fintech Innovation ETFARKF
6Apple IncAAPLElectronic Control Security, Inc.EKCSiShares Silver TrustSLV
7Tesla IncTSLAVaccinex IncVCNXARK Genomic Revolution ETFARKG
8AMC Entertainment Holdings IncAMCAltitude Acquisition Corp. Cl AALTUVanEck Vectors Semiconductor ETFSMH
9Castor Maritime IncCSTMChina Food & Beverage Co.CHIFiShares Russell 2000 ETFIWM
10Nio IncNIOAltitude Acquisition CorpALTUUTechnology Select Sector SPDR FundXLK
11Ocugen IncOCGNCyberfort Software, Inc.CYBFDirexion Daily Semiconductor Bull 3x SharesSOXL
12Zomedica Pharmaceuticals CorpZOMGrupo Supervielle S.A.SUPVARK Web x.0 ETFARKW
13Socket MobileSCKTAllstar Health Brands, Inc.ALSTSPDR Gold TrustGLD
14Tilray IncTLRYJMP Group IncJMPInvesco Solar ETFTAN
15Riot Blockchain IncRIOTOak Valley Bancp CAOVLYProShares UltraPro QQQTQQQ
16Eversource EnergyESMednax IncMDiPath Series B S&P 500 VIX Short-Term Futures ETNVXX
17Ehang Holdings Ltd AdsEHViomi Technology CO Ltd ADRVIOTAmplify Transformational Data Sharing ETFBLOK
18Bionano Genomics IncBNGOEnergous CorpWATTEnergy Select Sector SPDR FundXLE
19Gamestop CorpGMEHeritage Global Inc.HGBLiShares 20+ Year Treasury Bond ETFTLT
20Denison Mines CorpDNNTrans Global Group, Inc.TGGIiShares Global Clean Energy ETFICLN

Palantir was founded in 2003 by the Don of the PayPal Mafia Peter Theil, a contentious figure in Silicon Valley. Mr. Theil’s track record is impressive given his founding of PayPal (PYPL) and early investments in Facebook (FB). However, his support for President Donald Trump and conservative politics has made him a lightning rod for political debate, particularly in an industry that typically “leans left”. Perhaps it should not come as a surprise that George Soros’ Soros Fund Management, an early investor in PLTR, is believed to be one of the sellers during the lock-up expiration.

PLTR reported earnings on Tuesday, posting mixed results. A 10 cent miss on the bottom line garnered attention but, 40% year-over-year revenue growth allowed it to outpace top-line consensus expectations by 8%. The first-quarter earnings outlook was upbeat with accelerated revenue growth of 45% y/y expected (approximately $348 million compared to a $309 million S&P Capital IQ consensus). However, PLTR just reaffirmed its in-line revenue outlook for 2021. PLTR sees only 30% y/y growth compared to 47% in 2020. Conservative? Most likely, but it did provide a headwind for shares. More troubling for investors was the results in its commercial business, a key driver in Q3, which fell to just 4% y/y growth in the fourth quarter. Timing of the earnings disappointment was a problem given the lock-up expiration.

The lock-up expiration was Friday. 80% of PLTR’s stock was available for sale by executives and early investors. Recall PLTR came public via a direct listing and not the traditional IPO. In the initial direct listing, the company allowed existing shareholders to sell one-fifth of their holdings on the initial day it went public (September 30). The remaining 80%- approximately 1.3 billion shares- became available for sale on Friday. Shares of PLTR fell for six straight periods before bouncing late Thursday and holding that momentum in the Friday session. The Soros Fund is believed to be one of the sellers but it only held a 1% piece of the company. There was one notable investor though that had an interest in the name.

Ark Invest’s Cathie Woods, the current pied-piper of Wall Street, was on CNBC this week and said that the comments from PLTR’s conference around long-term plans were “music to our ears”. Ms. Woods has used data collection in AI as a key investing point for Tesla’s (TSLA) autonomous driving opportunities and the PLTR commentary around its AI leads her to believe that there is a tremendous opportunity. Ms. Woods was not alone in her praise as Goldman Sachs upgraded shares of PLTR to Buy from Neutral with a $34 price target after earnings.

We will dispense with an Ork Invest joke given Ms. Wood’s involvement. However, she has put together an impressive investing record in an environment that has seen a change in the global economy with the rise of tech. Given her commentary and retail interest, we would do our homework on PLTR for a conversation with clients.

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