On Monday morning, Palantir Technologies (PLTR) released the firm's second quarter financial results. Wall Street appears to have been less than amused.
Palantir posted adjusted EPS of a loss of $0.01 (GAAP EPS: $-0.09) on revenue of $473.01M. The adjusted EPS number fell short of consensus view and is down from $0.04 for the one year ago comp. The revenue print was good enough for 25.9% year over year growth as well as for a slight beat.
There are positives. As the firm's commercial business has long been smaller than its government business, growing that business has been a priority. The commercial business grew 46% year over year, while US-based commercial business increased 120%. US government driven business increased 27% in comparison.
The firm's US commercial customer count increased 250% to 119 clients (up from 34 in Q1 2021). Adjusted EBITDA margin of 24% provided adjusted EBITDA of $112.7M. GAAP net loss from operations decreased from $146.1M a year ago to $41.7M for this period on operating expenses that dropped from $430.9M to $412.5M. Still, this is at this point a money-losing operation.
For the current quarter, Palantir now expects to see revenue of $474M to $475M, and adjusted income from operations of $54M to $55M. Wall Street had been looking for revenue of roughly $507M. For the full year, the firm now expects to drive revenue of $1.9B to $1.902B and adjusted income from operations of $341M to $343M. Consensus had been for about $1.97B.
During the call, PLTR CEO Alex Karp indicated that he sees the firm reaching profitability in 2025. Hence, the stock was down more than 12% in the early going on Monday.
Palantir ended the three month period ended June 30th with a net cash position of $2.238B, and current assets of $2.902B. Both of these balances are slightly higher over six months. Current liabilities add up to $665.7M. Palantir may not be making money, but will certainly be able to weather rough seas for some time with a current ratio of 4.36.
Total assets amount to $3.282B. The firm claims no intangible assets. Total liabilities (less equity) have actually decreased a tad over six months to $933.5M. There is no long or short-term debt on this balance sheet.
Palantir may have its problems, but its balance sheet is fortress-like and is a reason to like this name longer-term if one can find the right entry point.
The stock closed on Friday at $11.45, up 77.8% from an all-time low of $6.44 on May 12th, but also down 74.6% from an all-time high of $45 in January of 2021. Big Data. The interpretation of big data. We know that the federal government will be a buyer. We expect that this kind of fiscal spending could be intermittent or inconsistent for at least a while.
Same goes for the private sector in this kind of environment. This name is investable, but only on a longer timeline, thanks to that M1 Abrams-like balance sheet. Otherwise, this one is just a trader.
The stock had managed to rally off of that May low and break out of a downward sloping Pitchfork that had been in place since last September. The daily MACD and Relative Strength had both improved dramatically over that time. The stock will give up a significant portion of those gains this morning. The important line here is the 50 day SMA at $9.37. Should that line hold, I would think that could be a reason to make an entry-level purchase.
It would also show that enough of those who entered this name since those lows were not ready to surrender just yet. My sources show that as of June 2022, 855 different funds had long-side exposure to PLTN up from 809 in March of 2022, which was down from 834 in December. That's interesting. 46 new funds entered the name this past spring and some of them were likely funds that had already cashed in their positions earlier.
I will say this. If I did get myself long some PLTR equity today, I would be very likely to sell both November $12 calls ($0.65 last) and November $8 puts ($0.50 last) in conjunction with the equity stake in order to knock more than a buck off of the net basis.