Palantir: How I'm Trading This Up and Coming Cash Flow Beast

It's been a tough month and a half for one of my favorite long positions, Palantir Technologies PLTR. You're right, this name no longer trades under $10 per share, nor is it a small-cap anymore. That said, Palantir was a core holding of the Stocks Under $10 portfolio and remains a core position among my personal holdings. I know a lot of subscribers followed us into this stock, so I like to periodically keep everybody up to date on what is going on with this company.

So, while we're still up decently, actually still about three-fold if you've been with us since the Stocks Under $10 portfolio days, the fact is that the stock is down about 20% since apexing on March 7. 

Let's get caught up on what's going on here over the past couple of weeks, shall we?

Oracle News

Back on April 4, which was the day that the broader market selloff that was technically confirmed this past Friday began, Palantir and Oracle ORCL announced a partnership meant to deliver cloud and AI services to both business and governmental clientele. The idea is to combine Palantir's leadership in generative AI and creating decision making acceleration platforms with Oracle's avenues of distribution for cloud and AI infrastructure, thus maximizing value for said clients. 

Oracle Vice President Rand Waldron said at the time... "Oracle is the only hyperscaler capable of delivering its entire AI and cloud suite to any business of government anywhere in the world." Palantir Executive Vice President Josh Harris added... "Palantir and Oracle are both dedicated to defending western interests and institutions around the world."

Wednesday Morning

This (April 17) morning, Palantir announced that it had been designated as an "awardable" vendor for the Chief Digital and Artificial Intelligence Office's (part of the Department of Defense) "Tradewinds Solutions Marketplace." Two of Palantir's products — The AI Mission Command Capability and the Predictive Maintenance and  Precision Sustainment Suite platforms — have been added to this marketplace and are now available to support critical missions across the DoD.

Those two Palantir platforms are now immediately accessible to government clients on this Tradewinds Solutions Marketplace. These platforms are capable of supporting critical needs across the DoD and can rapidly advance the Department's ability to operationalize artificial intelligence across a number of key initiatives from Joint All-Domain Command & Control systems to the difficulties found in organizing and delivering to deployed forces from a logistical perspective.

For those who do not know, the Tradewinds Solutions Marketplace is a digital repository of post-competition, readily awardable capabilities that can address challenges faced by the DoD in the arena of artificial intelligence, machine learning, and data analytics. This accelerates the procurement process and permits the many purchasers within the DoD to access emerging technologies more quickly. Providers, such as Palantir, have already been assessed through the DoD's scoring rubrics and procedures.

Earnings

On Monday, Palantir announced that it will release its first-quarter financial results on the afternoon of Monday, May 6, following the closing bell on Wall Street. The company will host a webcast of the earnings call at 17:00 ET that evening, which will be available on replay at its website, under the "investors" tab.

Currently, consensus is for adjusted EPS of $0.08 or a GAAP EPS of $0.03. That would compare to adjusted EPS of $0.05 for the year-ago comparison. Revenues are seen printing at a rough $625M, which would be good for year-over-year growth of 19%. Of the seven sell-side analysts that have revised their earnings forecasts since the start of the quarter being reported, all have increased their expectations for profitability.

Palantir currently trades at at 66 times forward-looking earnings, 22 times trailing sales and 14 times book. As of three weeks ago, 4.24% of the entire float was held in short positions. 

For the 12 months ended late December 2023, operating cash flow printed at $712M, up from $224M in 2022, as free cash flow printed at $697M, up from $184M in 2022. Palantir is quickly becoming a cash flow beast. Yes, I am long the stock and possibly biased.

My Thoughts

Readers will see the stock now breaking below the cup-with-handle-pattern created pivot that released the breakout this past February. The stock has already given up its 21-day EMA (exponential moving average) and 50-day SMA (simple moving average). Should the stock lose contact with that pivot, there is a very good chance that it moves to fill the gap created in early February. That would take the shares down to about $18 and test support at the 200-day SMA as it does.

This is where I suspect the real support may lie. My personal plan is to add nimbly as pivot cracks and scale the stock into that 200-day line. That is where I get decidedly more aggressive. As I have said before, this is one name I am investing in for the future generations of my bloodline.

At the time of publication, Guilfoyle was long PLTR equity.