Stocks Wobble as Fed’s pivot hope diminishes, and Palantir shines in a sea of Red.

Stock markets have had a tough day, as 10-year treasury yields rose above 4% after Uncle Powell re-affirming that it is too early for the Fed to pivot. With the strong, robust economic data release, traders are paring down the rate cut odds, sending stocks to take a breather after weeks of record new highs. 

🎢Another quarter of progress 🔑

One company stood out in today’s earnings: the darling of AI, Palantir. Let us review their latest earnings. 

The better-than-expected earnings sent shares of Palantir to soar more than 15% after hours. The firm demand from its commercial arm helped offset softer demand from its government revenue. 

💼Commercial Revenue A Key Focus💼

Indeed, we are seeing healthy growth in its commercial revenue, which jumped 32% from a year ago to reach $284 million, far higher than Wall Street’s estimate of $271 million. 

💰Government Revenue Remains Modestly Healthy🫕

While the growth of 11% from government revenue is lower than forecast, the continued geopolitical unrest in the Middle East and a fragile US-China relationship will likely benefit Palanatir in the longer term. As the CEO said, the government sector is a complex business, and their AI products could be in demand in such a volatile environment. 

🎲Big Deals Drove Higher Growth🎯

With more than 103 deals closed for the commercial and government sectors above $1 million in value, it is a remarkable achievement given that it projects a double from the same quarter a  year ago. 

🚦Geopolitical Interwined in the Business🗽

Investors of Palantir should be aware that politics could also be a double-edged sword for the company’s business. The CEO, as we understand, has been a staunch supporter of the Israeli military, which is also a vital customer of Palantir as it is at war with Hamas in Gaza. 

Hence, as Karp’s CEO said, the business model revolves around the critical assumption that we live in an unstable world that is likely to be a new norm in the world order. 

🛎Guidance is Robust and Optimistic🧮

The company also projects revenue slightly above expectation, and they expect the US commercial revenue growth to maintain at least 40%. One healthy trend is that its adjusted free cash flow stood at around $800 million to $1 billion, far higher than the consensus estimate of $658 million. 

It is 6 Feb 2024, Tuesday, 9 am in Singapore and 9 pm in New York. Among the key losers was the Russell 2000, which is a dent to our portfolio given the dimmer hope of a softer monetary policy environment. This pressure is compounded by China’s weaker performance, given that the bond market remains in trouble water. We maintain our holdings on both fronts and have been actively cutting positions on selective counters shared in our trading channel. 

We hope you have a fruitful trading day and love to have more discussions in our trading channel. 

Cheers,