Ticker Reports for November 5th
Palantir Cracks $50, Is There Still Time to Get on Board?
In midday trading the morning after another strong earnings report, Palantir Technologies Inc. (NYSE: PLTR) cracked the $50 mark. This is a significant milestone for retail investors who have been largely responsible for driving the growth in PLTR stock.
The surge in Palantir stock is due to what Palantir chief executive officer, Alex Karp, described as “a U.S.-driven AI revolution that has taken full hold.” Karp went on to say that when it comes to AI the world will be divided between the AI haves and the have-nots with Palantir’s intention to power the winners. Driving Palantir’s growth is its AIP platform which is helping companies generate meaningful insights from data collected by large language models, which Karp describes as being commodities.
Palantir Cleared a High Bar
For the last several quarters, Palantir has faced a high bar to clear. And so it was that PLTR stock was choppy heading into earnings as investors wondered if the company could exceed its lofty expectations. The results would say the company did just that.
- Revenue of $726 million was up 30% year-over-year (YOY)
- U.S. revenue growth of $499 million was up 44% YOY
- 39% YOY growth in customer count
- Palantir closed 104 deals for over $1 million
- Adjusted operating margin of 39%
- Over $1 billion of free cash flow guidance
- $4.6 billion in cash on hand with no debt
Watch What Institutional Buyers are Doing
The growth in Palantir stock has mostly been the result of conviction from retail investors. However, that is starting to change. To begin with, Palantir was added to the S&P 500 index in September. That means that fund managers who have funds that use the S&P as a benchmark have had to add PLTR stock.
The Palantir Ownership on MarketBeat shows an inflow of $692 million as opposed to $171 million outflow in the last quarter. However, that quarter ended September 30. The current quarter will be the first one that will show the real impact of Palantir’s addition to the index. And with the year coming to a close, more institutions will be looking to add Palantir stock, because investors will demand it.
Analysts May be Coming Around
The Palantir Analyst Forecasts on MarketBeat give the stock a consensus Reduce rating with a consensus price target of $27.86. Keep in mind, analysts are simply looking at the fundamentals and offering an opinion. It’s their job to protect investors from risk, and they view Palantir’s valuation as a risk.
That’s fair, but many analysts were also slow to buy NVIDIA Corp. (NASDAQ: NVDA) and found themselves playing catch-up. This earnings report was another example of Palantir clearing a high bar. There could be more upside to come.
With that in mind, since the report came out at least two analysts have raised their price targets. D.A. Davidson has raised the price target on Palantir to $47 per share from $19. And long-time Palantir bull, Dan Ives, raised his price target to $57.
Where is PLTR Stock Going?
In the short term, you should expect some volatility. To begin with, PLTR stock is trading at more than two times its normal volume which means it won’t take much for big moves one way or another. With PLTR up more than 22% the day after earnings, and 141% in 2024, it wouldn’t be surprising for traders to take some profit.
And while many analysts will say to ignore the election, that may be a mistake as it relates to Palantir. Don’t get me wrong, demand for Palantir software will be unaffected by the election result. But the outcome of the election could dictate monetary policy, particularly as it relates to unrealized capital gains.
A Harris victory could lead to a sharp sell-off as investors ensure they realize their gains in 2024. On the other hand, a decisive victory for the GOP is likely to cause both traders and investors to step on the gas for growth stocks like Palantir along with other technology stocks.
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These 2 Big Players Are Set to Compete With Elon Musk's Starlink
Along with Tesla (NASDAQ: TSLA), billionaire Elon Musk also founded the revolutionary space company SpaceX. The firm made headlines several weeks ago after it was successfully able to recover a booster that sent a rocket into space. This technology could allow boosters to be reusable, greatly reducing the cost of space launches. Boosters typically fall into the ocean, meaning that money invested in making them only contributes to one use.
Although the company makes billions in revenue from its space launch program, it is thought that its main source of revenue is through its Starlink technology. It's hard to know for sure since the company isn’t publicly traded. Starlink is a satellite-based, low-Earth orbit (LEO) internet service. It aims to provide high-speed internet to any location in the world. Traditionally, telecom companies use cables and towers to connect people and areas to the Internet. However, this makes providing internet to places that are rural or have dense or rugged terrain uneconomical.
The company generated approximately $4.5 billion in revenue from Starlink in 2024. That’s a pretty big number, and Starlink has over 4 million subscribers worldwide. In Q3 2023, the top five internet service providers in the U.S. had around 92 million subscribers. That means massive growth is still available for satellite-based internet service providers. However, Starlink isn’t publicly traded, making it a difficult space for investors to get exposure to. Luckily, publicly traded firms are taking notice of this opportunity and working on their own solutions.
Amazon Wants to Be a Telecom Company, Too
Amazon (NASDAQ: AMZN) is looking to compete with SpaceX through its Project Kuiper. The company said it planned to invest $10 billion into the project back in 2020. That's a big number. But, it's manageable. The company had $88 billion in cash and short-term investments on its balance sheet last quarter. The $26 billion in cash from operations the company generated last quarter makes it look even less intimidating.
The company is aiming to launch 3,236 satellites into LEO to provide its internet service. That’s a little more than half as many as SpaceX has in orbit now. The company’s agreement with the Federal Communications Commission (FCC) requires that half of the satellites be in operation by Jul. 2026, less than two years from now. So far, it has only launched two prototypes. It took SpaceX just over two years to get 1,800 satellites into orbit. Amazon needs to get around 1,600 into orbit in about six months less time. The company delayed the launch of its first commercial satellites a couple of weeks ago.
It better get on its horse if it hopes to meet the FCC deadline. Failing to meet this wouldn’t be a good look to the market, as it could cause it to lose its FCC license to operate the network. Amazon's massive size makes it a strong player. It can invest the billions needed to compete with Starlink. It could pay off big-time, but it needs to start making more progress soon.
Geely: Satellites, Internet, and Autonomous Driving
Another company looking to compete with Starlink is Geely Automobile (OTCMKTS: GELYY). Geely is a Chinese automaker that owns several brands, including Geely, Polestar (NASDAQ: PSNY), and Volvo. One of its subsidiaries is Geespace, which is building and launching LEO satellites. The company launched nine satellites in 2022, and with its September launch of 10 more, it now has 30 in orbit. It said these satellites now cover 90% of the globe and is planning to launch 72 more in 2025. The company hopes to eventually have the 6,000 satellites in orbit that SpaceX does. However, it seems to be moving pretty slowly, only planning to have 72 launched by the end of 2025.
One interesting aspect about Geespace compared to Amazon’s Project Kuiper is that it makes a bit more sense in the context of the overall company. While Geespace also looks to provide broadband internet, its primary objective is to connect to Geely’s portfolio of automobiles. It wants to do this to enable strong autonomous driving capabilities. Autonomous driving needs very low-latency communication between vehicles. These satellites aim to provide it. In that sense, betting on Geely is a bet not only on satellite-based internet, but also on autonomous driving.
Of course, it is also a bet on Geely as an auto company, just as Amazon is also a bet on its e-commerce and cloud computing businesses.
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NXP Semiconductors Nears Rock Bottom: A Buy Signal Is Expected
NXP Semiconductors (NASDAQ: NXPI) share price action in 2024 is weighed down by headwinds, but the long-term uptrend is intact. The headwinds include macroeconomic pressure and weakness in critical semiconductor end markets, which the company cannot control. It can control operational quality and capital return, which investors should focus on today.
The macroeconomic headwinds have pressured the stock price to a more attractive level and a price floor indicated by the analysts; operational quality, cash flow, capital return, and improving business leverage will support the market at these prices and lead to a solid buy signal. It may take a quarter or two for the consolidation to run its course; when it does, NXPI stock will resume the uptrend and move up to new all-time highs.
NXP Semiconductors Can Sustain Its Capital Return
NXP Semiconductors had a lackluster Q3, with revenue falling 5.2% to $3.25 billion, aligning with the analysts' consensus reported by MarketBeat. The weakness is due primarily to the communications and IoT end markets, which fell by 19% and 7%, respectively. Automotive was down only 3%, and mobile grew by 8%. The bottom-line strength offsets the top-line weakness, with the adjusted gross margin at 58.2% and the operating margin at 35.5%.
The critical details today include the cash flow and free cash flow, which are robust enough to sustain the capital return program while maintaining a healthy balance sheet and funding growth opportunities. The free cash flow margin came in at 18%, providing nearly $600 million in capital, mostly returned to shareholders. The company’s capital return free-cash-flow payout ratio ran at 95% for the quarter and 85% on a TTM basis, leaving room for cash to build on the balance sheet.
The balance sheet highlights at the end of Q3 are favorable to investors. The company logged a year-over-year (YoY) decrease in cash caused by business investment, including the advancement of two joint ventures, but all other details are positive. The company’s long-term assets are up, offsetting the cash decline, with total assets flat, liabilities and long-term debt down, and equity up 10.75%.
Long-term debt is just over 1x equity, with total liability less than 2x, leaving the company in a strong financial position to sustain its projects until macroeconomic headwinds diminish. Because of the path of FOMC interest rate cuts, that is expected by mid-year 2025. The forecast is for at least another 75 basis points of rate reduction by June, putting the base rate at the lowest level in over two years.
NXP Semiconductors Falls on Soft Guidance
NXP Semiconductors' guidance is why the stock fell 6% following the Q3 release. However, weak relative to the consensus, even with the 5% sequential reduction in revenue, the company’s results will be sufficient to sustain financial health and capital return. The risk is that business will not improve substantially in 2025, contrary to the consensus forecasts. End markets, including automotive and IoT, are expected to return to growth and drive an 8% top-line advance and wider margin.
NXPI stock fell more than 6% following the earnings release but is unlikely to fall much further. The move aligned the market with the analysts' lowest price target, a potential floor for the action coincident with a critical support target. The critical support target is near $222, and the lows set in September match the analysts' lowest target. The first revision following the release is a reiterated rating and price target aligning with the trend, implying a 20% upside for this market and a return to the high end of the 2024 trading range.
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