Shares of Palantir (PLTR) retreated Tuesday, after the company reported first-quarter results late Monday. Some experts pointed to modest domestic revenue expectations as the likely culprit, but that repudiation may be too harsh.
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It may also bring opportunity with the Direxion Daily PLTR Bull 2X Shares (PLTU), which attempts to deliver 200% of the daily performance of Palantir shares. Indeed, there’s a case for Palantir being treated too harshly following earnings and thus, a case for occasional use of PLTU as well. After all, Chief Revenue Officer and Chief Legal Officer Ryan Taylor said, on a conference call with analysts, that the company’s Rule of 40 score surged 145%.
As for fears about the state of Palantir’s U.S. business, which accounts for 79% of total revenue, that segment posted year-over-year sales growth of 104% in the first quarter. The issue for Palantir investors and PLTU traders is the company’s ability to meet soaring domestic demand.
“Our biggest problem currently is demand in the U.S. I believe we will have 100% growth in the U.S. It’s that we just cannot meet demand,” said CEO and co-founder Alex Karp on the call.
Palantir Can Rebound
With Tuesday’s decline, Palantir can be viewed as a near-term rebound idea. That indicates that PLTU could have some immediate utility for risk-tolerant traders. There are some issues, including valuation, that need clearing up. However, those bells could be answered.
“The key debate is not whether Palantir is a great company (it is; we rarely see this combo of growth and profitability), but rather if the valuation can make sense (it can, but things need to go well) and if frontier models represent a true competitive threat to Palantir’s ontology (it’s possible, but not probable),” noted Morningstar’s Mark Giarelli.
It’s possible that a near-term rebound materializes, validating use of PLTU in the process. As Giarelli points out, the first-quarter U.S. revenue miss is mostly attributable to customer reclassification, not fundamental weakness. Plus, it could still post revenue growth of as much as 45% over the next five years.
“The success of Palantir’s forward-deployed engineer strategy, integrating tightly with customers to reduce time to value, has attracted copycat strategies from AI labs, but we still think Palantir’s ontology stacks up well thanks to its governance layers and limitations on competitor context windows,” added Giarelli.
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