PALANTIR Q4 EARNINGS PREVIEW | Palantir Weekly #188

SUMMARY

The latest episode of Palantir Weekly delves into the company's upcoming Q4 earnings report, discussing investor sentiment, valuation concerns, and growth prospects. Panelists explore Palantir's contract activity, expectations for revenue growth, and the potential impact of stock-based compensation expenses.

MAIN POINTS

• Introduction to the episode and the context of Palantir's Q4 earnings cycle. [0:08]
• Discussion of investor perceptions and sentiment surrounding Palantir's valuation. [1:58]
• Panelists share raw thoughts on the company's all-time high stock price and earnings expectations. [4:05]
• Analysis of projected revenue growth and challenges in meeting lofty expectations. [5:39]
• Exploration of 2025 growth forecasts and whether they justify current valuations. [13:16]
• Debate on customer acquisition strategies and the role of existing customers in driving growth. [16:40]
• Examination of international revenue growth and its impact on overall performance. [20:17]
• Discussion of Palantir's nascent customer scaling and its implications for long-term growth. [23:52]
• Analysis of Wall Street's revenue estimates and whether analysts are underestimating Palantir. [33:11]
• Evaluation of whether Palantir's stock price aligns with its maturity stage and growth potential. [40:55]
• Insights into the growing average revenue per customer and AIP's role in driving usage. [1:03:45]
• Assessment of stock-based compensation (SBC) and the expected impact of SARS expenses. [1:09:17]
• Focus on total contract value (TCV) as a metric to gauge future revenue potential. [1:29:22]
• Discussion of Alex Karp's relationship with Elon Musk and its implications for Palantir’s perception. [1:41:51]

DETAILED ANALYSIS

In the latest episode of Palantir Weekly, the panelists, including prominent analysts, discussed the company's upcoming Q4 earnings report, which will mark the conclusion of its 2024 fiscal year. The episode began with an overview of Palantir's recent stock performance, noting that the company hit an all-time high before settling slightly lower. This achievement was contextualized against a backdrop of heightened investor enthusiasm and broader market optimism about artificial intelligence (AI) applications.

One of the central topics of discussion was Palantir's valuation and evolving investor sentiment. Arie shared insights from international investors, highlighting a gradual shift in perception, where once-skeptical investors are now recognizing the company's potential but expressing concerns over its current valuation. The panel noted recurring apprehensions about Palantir being 'too expensive' and debated whether this perception is justified by its growth trajectory.

As the conversation turned to earnings expectations, panelists dissected potential revenue growth figures. While management guided for 27% growth, some panelists predicted a higher figure, citing the momentum Palantir has built with its AI platform, AIP. Amir suggested a potential revenue growth rate of 31%, driven largely by expansion within existing customers.

However, Matt urged caution, pointing out that achieving 10% quarter-over-quarter growth would be unprecedented in recent years. The panel agreed that investor sentiment would likely hinge on whether Palantir can exceed its guidance and maintain its narrative of robust growth.

Looking ahead to 2025, the discussion shifted to long-term growth expectations. The panel explored whether Palantir's valuation, currently trading at a price-to-sales multiple far above industry averages, is sustainable. While the company is expected to guide for strong growth, panelists debated whether its projected trajectory justifies such a premium valuation.

Matt emphasized that even with a generous assumption of 40% revenue growth in 2025, the stock would still appear overvalued by traditional metrics.

Customer acquisition and scaling were another focal point. Palantir's current customer count of approximately 630 was scrutinized against its potential to serve tens of thousands of clients globally. Amir argued that the company remains in its early stages, given its limited penetration across industries.

This view was counterbalanced by Matt, who pointed out that Palantir's market capitalization places it among mature companies like Disney and Pepsi, raising questions about its perceived maturity.

The panel also examined international revenue growth, noting a decline in non-U.S. commercial revenues. This trend was attributed to slower AI adoption in Europe, as highlighted by CEO Alex Karp. Despite this, the panelists expressed optimism about Palantir's ability to scale revenue within its existing customer base, with AIP playing a pivotal role in driving increased usage.

Stock-based compensation (SBC) and the anticipated impact of SARS (stock appreciation rights) expenses were identified as potential risks. While the panel acknowledged that these expenses could temporarily affect earnings, they emphasized that the long-term operational narrative remains intact. Amir noted that SBC as a percentage of revenue has been declining, aligning with industry averages, which could mitigate investor concerns.

Total contract value (TCV) was highlighted as a critical metric for gauging future revenue potential. Amir predicted that Palantir's Q4 TCV could reach a new all-time high, driven by significant deals like the $600 million U.S. Army contract. The panel agreed that robust contract activity would signal strong demand for Palantir's solutions and bolster confidence in its growth trajectory.

The episode concluded with a lighter discussion about CEO Alex Karp's public endorsement of Elon Musk amidst recent controversies. This alignment was seen as a positive reflection of Palantir's values and its positioning as a key player in AI and defense technologies.

In summary, the panelists conveyed cautious optimism about Palantir's Q4 earnings and future prospects. While acknowledging the company's lofty valuation, they emphasized its unparalleled positioning in the AI space and its potential for sustained growth. Investors will closely watch Monday's earnings report for guidance on 2025 growth and any signals of further momentum in its AI-driven narrative.

LINKS

• Amit Kukreja's profile on X (formerly Twitter).
• Arny Trezzi's profile on X (formerly Twitter).
• Emir's profile on X (formerly Twitter).
• Matt's profile on X (formerly Twitter).

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