💔 PLTR | ARK Invest’s $1 BILLION Breakup with Palantir Stock

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palantir stock has collapsed in the last
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few days since their most recent
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earnings call and kathy wood has sold
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the dip big time i've spent the last
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couple days really digging into the
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business and the stock to try to answer
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one simple question why did kathy would
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sell pounds here and does that mean that
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we should too hey wait that's two
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questions your time is valuable so let's
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get right into it starting with
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arkhanvest and palantir over the last
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week kathy would sold about 60 of her
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palantir shares including massive sales
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out of rk and arc w the two funds that
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she had by far the most shares of pound
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tier in when you combine that sale with
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palantir's drop in price the stock
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dropped from arkhanvest's 19th biggest
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position overall to their 37th in a
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single day these are the kinds of sales
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that make me think that kathy wood will
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dump the stock entirely over the next
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week or so instead kathy would bought
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stocks like roku zoom uipath c limited
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roblox and shopify the thing all of
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these companies have in common is that
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they're much more pure play names and
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have also collapsed in price over this
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past week for example roku is down over
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thirty percent over the last five days
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roblox stock is down almost thirty
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percent zoom is down by another ten
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percent bringing it to almost eighty
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percent off its peak and shopify is down
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20 in the last five days on and on it
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goes kathy wood often says that when all
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innovation stocks go on sale like they
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have been with the latest inflation news
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interest rate news and ukraine news she
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tends to concentrate down into her most
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pure play names been doing for the last
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six months is
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expanding the number of names in our
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portfolio and we do that as a bull
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market extends
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because
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in some ways it's a tax efficient
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strategy
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what we will do during a correction
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especially a severe correction we will
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sell names in which which are creating
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losses now because again we've bought
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them we've diversified and bought them
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more recently
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sell those names creating losses
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to buy our highest conviction names uh
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some of the names we've been moving into
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you'll notice some of the bigger biotech
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names and what we will do during
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and we we think of them as cash-like so
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we're using them as cash-like
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instruments in in some some way because
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we will move back into our pure play
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names uh if we get into a severe
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correction so we we use corrections
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toggling back and forth and so right now
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our flagship
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our flagship portfolio has roughly 52
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names in it
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at the low point in the coronavirus last
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year it was as low as 33 i believe these
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sales don't make palantir a bad company
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or pound to your stock a bad stock it
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just means it doesn't fit in
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arkhanvest's niche strategy of investing
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in pure play innovation this is why i
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think arc invest is selling palantir if
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we look at arkanvest's latest stock
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commentary email from this morning we
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can get a little more insight while
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surpassing revenue expectations with 34
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percent year-over-year growth thanks to
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success in u.s commercial palanti
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reported a significant deceleration in
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growth in the larger government division
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suggesting perhaps a change in
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government procurement behavior this is
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another situation where i don't agree
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with arc invest and i'll show you why in
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a few minutes for better or worse
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neither did other institutions at least
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at the end of the last quarter over the
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previous quarter eight of the top ten
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institutional holders of palantir bought
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millions of shares arcanvest was one of
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only two of the top ten institutions to
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be a net seller of pallentier stock
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let's talk about what's going on with
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the stock itself and then dive into the
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company pounce your stock is firmly in
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the young high-tech growth category it
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direct listed on the new york stock
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exchange less than two years ago at the
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start of quarter four of 2020. the stock
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market right now is punishing every
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company that doesn't immediately crush
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insanely high expectations let me break
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that down for you when the market
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focuses on things like high inflation
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high interest rates and border conflicts
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time horizons shrink meaning people want
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returns on their investments sooner and
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with less risk as things get more
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expensive and unpredictable people want
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to know that their money isn't locked up
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for very long high growth companies are
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by definition long-term investments
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you're sacrificing profitability today
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for higher growth down the road on top
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of that rising interest rates make bonds
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look more attractive since they become
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higher yield when that happens risky
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stocks look even riskier since they now
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need to outperform better performing
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bonds rising interest rates also make it
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more expensive to borrow money any
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algorithm that sees negative incomes
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will assume a company is cash poor and
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these algorithms are responsible for
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half of all market trading volume
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especially in times of high volatility
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so this is really a perfect storm for
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stocks like palantir and palantir really
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couldn't afford to miss earnings in this
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kind of market let's dive into their
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earnings right now and talk a little bit
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about what actually happened and whether
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or not palantir is still a good
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investment as a result
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at a high level palantir's total revenue
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grew by 41 which is broken down to 47 on
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the government side and 34 on the
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commercial side by the way at the end of
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last year they guided for revenue growth
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in excess of 30
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so they absolutely smashed their own
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revenue guidance for the year let's dig
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into these numbers a bit
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this is a pretty cool slide that i've
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never seen from palantir before
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according to capital iq there are only
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five software as a service companies
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that made over a billion dollars in
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revenue in the last year that have both
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higher year-over-year revenue growth and
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higher adjusted free cash flow margins
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than palantir take that with a grain of
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salt because that margin adjustment is
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for things like stock-based compensation
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which palantir is notorious for still
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palantir is a very high growth company
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when compared to its peers another
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really important slide to understand is
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that gotham palantir's platform focused
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on government work is nearing its full
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total addressable market in terms of
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capabilities they've expanded gotham
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over the years from helping the
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intelligence community to law
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enforcement and fraud to operational
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intelligence and logistics and then to
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ai at the edge at the same time foundry
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has been expanding from a data platform
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to analytics to a simulation engine and
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then digital twins they also
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specifically call out hyper auto which
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is one of the reasons i'm so interested
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in wijo and have been interviewing their
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ceo richard barlow the reason this slide
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is important to understand is because as
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palantir's capabilities expand so does
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the list of clients they can go after
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this is why i'm always harping on
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palantir's new markets like when they
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entered crypto palantir's total customer
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account grew by 71 percent in 2021 and
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palantir is proving to be very sticky
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what does very sticky actually mean it
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means that every customer they gain
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spends more and more money with palantir
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each year how much more money well in
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2021 palutear's net dollar retention was
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131 percent meaning palantir's existing
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customers from 2020 or before not only
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kept working with pound tier but spent
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31 percent more money with them in 2021.
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let's break these numbers down into the
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government and commercial side since
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arkhamvest's issue with palantir seem to
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be focused on their growth in government
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government revenue growth year over year
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was at 47 but it was heavily front
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loaded to the first quarter my sneaking
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suspicion on this is that it's because
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the government's fiscal year is october
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1st to september 30th not january to
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december so if government agencies get
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their budgets in october and then need
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to start negotiating contracts after
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that palantir's deals might not actually
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sign until after january a 90-day
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turnaround for a government contract
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doesn't sound so crazy but what that
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does tell me is that more government
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agencies could be spending more of their
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budgets on palantir as soon as they get
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their budgets instead of waiting until
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later in the fiscal year overall
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government customer account was flat but
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they're clearly getting more work per
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customer their average trailing 12-month
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revenue per government customer has
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tripled over the last four years and was
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up 46 over the last year it seems like
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valencia is getting more money from the
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government earlier in the fiscal year
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this year than last year so i'm not
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really understanding arc invest stock
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commentary on the government procurement
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here now let's talk about palantir's
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commercial growth since that's where
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paluncher's massive total addressable
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market really is palantir's commercial
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revenue grew 34 for the year but the
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quarterly pattern is the exact opposite
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from the government side i think this is
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because private companies try to pay for
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as much of their next year's costs in
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december to lower their taxable income
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for that fiscal year unlike the
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government who spends that tax money
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when they get it in the form of the
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government budget pounds here's
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commercial customer account tripled year
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over year but in my opinion what we
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really care about is palantir's u.s
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commercial customer business really for
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two reasons first palantir's culture in
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general and alex carp specifically seem
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to be very focused on the u.s pound here
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is a patriotic company second their net
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dollar retention rate in the us is much
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higher than abroad 150 percent compared
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to 103 percent meaning that palantir is
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much more sticky with u.s commercial
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customers than they are overseas as a
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result it's great to see that their u.s
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commercial customer account is
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increasing by almost 400 percent year
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over year here's the second issue that
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i'm seeing investors punish palantir for
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with this increased focus on their
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commercial business comes an increased
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focus on hiring salespeople this is an
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upfront cost that's eating into their
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profitability today but is obviously
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going to pay off in the long run since
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more salespeople means more clients and
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more clients times a higher net dollar
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retention rate is one way to achieve
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exponential growth we're already
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starting to see that exponential growth
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on the us commercial side and i expect
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that growth to continue even more with
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the addition of more salespeople as
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investors we really need to decide what
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we want out of palantir if we want them
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to be a software as a service provider
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we shouldn't be selling the stock
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because they're building up a sales team
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if we want them to be more focused on
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the commercial side we shouldn't sell
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the stock when the growth on the
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government side is slowing down if
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investors want them to grow
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exponentially in the future we shouldn't
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sell when they're reinvesting in that
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growth today at the cost of current
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profitability wall street looks at all
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these things and sees something bad but
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again analysts are really looking at
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things quarter by quarter especially in
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today's volatile environment so comment
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below or tweet me at ticker symbol u
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with your thoughts on palantir's latest
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earnings call do you see anything that
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warrants such a sharp decline in their
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stock price or a reason for arc invest
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to be selling it other than what i
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already mentioned i'm excited to hear
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your thoughts if you're a long-term
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investor like me this is a great setup a
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whole bunch of macroeconomic factors are
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coming together to push pounce your
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stock down while the company is setting
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itself up for serious growth down the
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road i really like what i saw in their
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most recent earnings report and i'm not
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really seeing why arkhanvest thinks that
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the government procurement cycle has
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changed all i'm really seeing is more of
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the government's business coming
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palantir's way earlier in the
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government's fiscal year if anyone sees
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it differently i'd be happy to hear
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about it in the comments as well because
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my current plan is to start loading the
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boat at these prices maybe i'll even end
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up buying some of the shares that kathy
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wood just sold hopefully this episode
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helped you understand the disconnect
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between valencia's growth as a company
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and the decline of their stock as well
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as why kathy wood selling it isn't
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really a reflection of the company as
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much as it is arc invest goals and their
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investment style if it did consider
11:02
liking this video and subscribing to the
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channel with all notifications turned on
11:06
that's a great way to invest in the
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channel that invests in you and if
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you're looking for more bite-sized
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insights every day i'm always posting
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follow ticker symbol you on whatever
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channels you're already surfing and if
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you're looking for more of my palantir
11:23
content check out my playlist full of
11:25
deep dives on palantir right here or if
11:27
you're looking for other top stocks that
11:29
i've been eyeing and buying check out
11:31
this episode right here either way stay
11:34
long stay strong and thanks for watching
11:36
until next time this is ticker symbol u
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my name is alex reminding you that the
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best investment you can make
11:43
is in you