TOP STORY
📈 Palantir Soars 39% After Exceptional Q4 Earnings

👀 One word was on everyone’s mind this week: Tariffs.

😰 With fears swirling around the impact of Trump’s tariffs, many were expecting a rough week in the stock market. But with Trump agreeing Monday to a 30-day pause if Mexico and Canada strengthened their borders, the brunt of the blow was mostly avoided.

📊 Here’s how the markets performed since market open on Monday:

• S&P 500: +0.94%

• Nasdaq 100: +1.93%

• TSX: +1.21%

• Bitcoin: -3.7%

📉 Despite the overall green week, Friday erased much of the gains as the S&P 500 fell -0.95% and the Nasdaq 100 fell -1.3% after Trump’s announcement of more ‘reciprocal' tariffs’ drove more confusion.

But of all the stocks in the market, one in particular put up shocking numbers this week: Palantir ($PLTR), which soared a massive 39% 🤯 

🔍 So before we take a look at some of the other interesting news this week (such as Amazon’s plans to invest $100B more into AI, Uber soaring 14% after Bill Ackman’s reveals $2.3B stake, and Tesla falling 6% after struggles in China) let’s deep dive into what’s going on with Palantir, and breakdown the driver of these massive gains.

💰 Palantir’s Delivers Earnings 27% Higher Than Expected

💡 Now before we jump in - if you’re unfamiliar with Palantir and need a refresher, here’s a summary I wrote in a November edition of the Weekly Buzz about what the company does and how they make their money!

🔍 At a high level, Palantir helps both the government and the private sector turn messy, unstructured data into actionable insights, with an average contract value of $6.5M.

📊 Now that you’re up to speed - let’s dive into the numbers:

• 💸 Earnings per share: $0.14, 27% higher than analysts expected

• 💰 Revenue: $828M, up 36% from last year, 7% higher than expected

⭐️ The biggest driver of the revenue increase was growth from it’s commercial revenue which grew 64% from last year.

🦅 Historically, the majority of Palantir’s revenue came from the US government, but that is rapidly changing with the % of revenue coming from the government falling from 44% to 41% this quarter.

🎯 It wasn’t just Palantir’s Q4 numbers that surprised investors, Palantir also set expectations high for Q1 - with revenue expected to be ~$860M, well ahead of analysts estimates of only $799M.

🚀 All this drove the stock to rocket up 39% this week, with the stock now up a massive 352% over the past year, bringing it above a $200B valuation - more valuable than Disney, American Express, and even McDonalds and making it one of the 50 most valuable companies in the US.

🔥 The Palantir ‘Revolution’

A huge part of Palantir’s thesis is that large language models (LLMs) are ‘commodities’ and that while most of the industry is focusing on improving LLMs, Palantir focuses on capitalizing “on the rich context within the enterprise.”

CEO Alex Karp says this approach is paying off and referred to Palantir’s trajectory as a ‘revolution’ (a word he used 13 times in the earnings call):

🧐 Still, despite the meteoric growth, analysts have historically been very skeptical about the stock - with it ranking as the most expensive stock in the S&P 500 (based on its price-to-sales ratio).

🏔️ The last time we talked about Palantir (when the stock was 45% lower than it is now), analysts said it was trading at an ‘unprecedented premium’ and at ‘Mount Everest valuations’. So let’s take a look at how analysts are reacting to the recent earnings and soaring stock price...

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TOP STORY CONTINUED
🎶 Are Analysts Changing Their Tune on Palantir?

👎 When I last wrote about Palantir in November - all the analyst commentary was largely negative, with analysts arguing the stock was wildly overvalued and that its high ~50% retail ownership could lead to “quick and significant multiple compression should the stock go out of favor” (aka a crash).

🎶 But now, it seems analysts have changed their tunes, with many increasing their price targets after the quarterly results (which some more than doubling it):

• UBS raised its target from $80 to $105

• DA Davidson raised its target from $47 to $105

• Citigroup raised its target from $42 to $110

• Bank of America raised its target from $90 to $125

• Morgan Stanley raised its target from $60 to $95

Even Jefferies, which still has an ‘Underperform’ rating on the stock, more than doubled its target from $28 to $60…

Still - based on data from Tip Ranks, the average forecast is 20% below the current price. The biggest criticism? Even though the earnings are impressive, many believe the company is overvalued.

Based on its price-to-sales ratio (a measure of how expensive the stock is), Palantir is the most expensive stock in the S&P 500 - with a price-to-sales of 70, over 20 times higher than the S&P average of 3, and even double the price-to-sales ratio of Nvidia. As one analyst points out:

Another analyst goes even further, saying:

Many on Blossom agree, with @jacobb writing a very detailed post and analysis on Palantir where he says, “As for valuation. It’s expensive. Extremely expensive. I could not find any reasonable justification for the valuation.”

Even so - as James from TheStreet acknowledges, just because a stock is overvalued doesn’t mean it’s due for a crash, reminding investors that “this sort of action tends to persist for much longer than seems reasonable.”

In any case - as I said in November (and even more so the case now), Palantir is ‘priced for perfection,’ and to keep its momentum, it will need to keep delivering the incredible numbers we saw this quarter and not fall out of favor with its large retail investor audience who seem to be ok with the extremely high valuation multiples on the stock.

Is that impossible? Well, I’ll leave you with this quote from Gil Luria, the Managing Director from D.A Davidson from an interview he gave with Bloomberg:

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🚨 Listing Alert: CIBC Announces New CDRs for 5 European Companies

📣 Normally we cover ETFs in this segment, but a different kind of new listing hit the market this week from CIBC - CDRs, aka Canadian Depositary Receipts.

💡 CDRs are a way for Canadian investors to buy shares in foreign companies using Canadian dollars, allowing for currency hedging and as a way to avoid currency conversion fees.

🔥 And now, adding to its already extensive line-up of more than 80 CDRs, CIBC has added 5 new European stocks to the line-up including:

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• BMW CDR (CAD Hedged) – BMW

• Mercedes-Benz CDR (CAD Hedged) – BENZ

• SAP CDR (CAD Hedged) – SAPS

• Siemens CDR (CAD Hedged) – SMNS

ALSO IN THE NEWS
🗞️ Other Key Headlines this Week

📈 Uber Soars 14% this Week After Bill Ackman Reveals a $2.3B Stake

• Uber ($UBER) jumped 14% this week after billionaire and high-profile investor Bill Ackman revealed a massive $2.3B stake in the company and said the stock is trading at a “massive discount.”

• In its recent Q4 earnings, Uber reported a 20% increase in revenue and a 381% increase in Net Income, beating analyst expectations.

• Many have worried that autonomous vehicles would disrupt Uber, but many analysts now view this as an opportunity as the company forges partnerships with Google-owned Waymo and start-up Avride.

💰 Amazon Stock Slips 4% After Committing $100B to AI

• Amazon ($AMZN) also reported Q4 earnings this week with an 11% revenue increase - surpassing Walmart as America’s largest company by revenue.

• Amazon’s AI-driven Amazon-Web-Services segment continues to be its biggest growth driver, but warned investors that capacity constraints may hinder growth - predicting Q1 revenue 3% less than expected.

• Amazon also announced plans to spend $100B on AI this year, with the vast majority going towards its AWS cloud business saying that “AI represents the ‘biggest technology shift and opportunity in business since the internet”

📉 Tesla Plunges 6% After Disappointing Chinese Sales Numbers

• Telsa ($TSLA) stock fell 6% this week after reporting sales in China fell 11.5% since last year while it’s competitor BYD sales have surged 47% - meaning Tesla is losing significant market share.

• Sales also plunged in Germany, France, and UK - with German sales falling to the lowest level since 2021.

• Some believe part of the sales drop may be driven by Musk’s strong political stances, alienating some consumers.

FROM THE BLOSSOM COMMUNITY
⭐️ Featured Discussions this Week

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