Why Palantir Posted Such Weak Results

Palantir Technologies Inc.’s (NYSE:PLTR) lockup expiration should have torpedoed the stock to the low $20s last week. But when Cathie Wood’s ARK Innovation bought the PLTR dip, it limited the drop.

Palantir’s fundamentals are atrocious. The Q4 loss is unexpected, especially after a 40% growth in revenue. For the FY 2020 period, PLTR posted a 47% increase in revenue to $1.1 billion. The average revenue per customer grew by 41%.

The company added many key customers in Q4. This includes the U.S. Army and Air Force. FDA and NHS are governmental agencies that will add meaningful contracts in 2021. Rio Tinto and PG&E are new Palantir customers.

The company issued an incredible amount of stock-based compensation. In Q4, it paid out $241.8 million. Revenue of $322.1 million in the same period would net only $80 million for the period.

Momentum investors will need to ignore the price-to-sales ratio of 52.4 times. Snowflake (NYSE:SNOW) trades at an almost 170 P/S, which would justify PLTR’s current inflated value. In relative terms, the stock is not “relatively” expensive.

The disciplined value investors will have no business considering this stock for now. Conversely, the insider lockup will enrich staff. These insider sales will increase share liquidity, helping momentum investors.

PLTR stock is a trade. Rent the stock but sell it if selling pressure accelerates.