Gotham's Golden Cross: How Palantir Took Over WallStreet

2024 wasn’t just a banner year for Palantir Technologies (NYSE: PLTR); it was a blockbuster sequel that kept Wall Street on the edge of its seat. With an astounding 340.5% stock rally, topping the S&P 500, Palantir went from a niche tech player to The Wall Street Darling. Here’s a dive into the milestones, market moves, and the data wizardry that propelled this meteoric rise.

The Data Detective in Its Infancy

Back in 2003, Palantir was the scrappy underdog of Silicon Valley gaining little to no traction. Think of it as the digital Sherlock Holmes, solving mysteries for the CIA and NSA with its top of the line platform, Gotham. Co-founders Alex Karp and Peter Thiel had intricately crafted it to be the ultimate crime-solving tool, untangling terror plots with surgical precision.

Speaking of Peter Thiel, the billionaire entrepreneur and venture capitalist brought more than just ample seed funding to the table. Known for his contrarian bets—he was Facebook’s first outside investor—Thiel saw Palantir as the antidote to big data chaos. His philosophy of supporting companies that challenge conventional norms has left an indelible mark on Palantir’s DNA, encouraging the firm to embrace bold moves like prioritizing government contracts early on and later pivoting to commercial clients. Thiel’s influence continues to be felt, both in Palantir’s strategy and its swagger.

Founder & Chairman Peter Thiel

The catch? Palantir’s reliance on government contracts made its revenue growth as predictable as a slow-moving train. Sure, the partnerships were stable, but investors wanted fireworks—not just steady sparks.

The Commercial Pivot

By the late 2010s, Palantir decided it was time for a switch-up. Enter Foundry, the company’s Swiss Army knife for the enterprise world. This platform could accost everything from supply chain kinks to financial forecasting, making it the desired tool for businesses wanting to supercharge their data game.

The company’s 2020 IPO via direct listing—a bold move in itself—was met with mixed reviews. While the tech seemed promising, critics questioned the company’s profitability and scalability. Palantir’s stock performance, much like a Hollywood underdog, needed a breakout moment.

2024: The Year of Living Data-ously

2024 represented a watershed moment in Palantir's trajectory, signifying a pivotal inflection point in its corporate evolution. The following milestones epitomize the strategic imperatives and seminal developments that catalysed its remarkable market ascent:

1. Palantir didn’t just dip its toes into artificial intelligence; it cannonballed By integrating generative AI capabilities, the company has revolutionized how clients extract insights from their extensive data assets. Experts have noted that its AI-driven predictive models represent a significant advancement in operational efficiency and risk management.

2. Strategic Alliances: Think healthcare, energy, and finance—Palantir partnered up like a data-powered Avengers team. Vital deals with giants like BP and Lockheed Martin grew its market share, with analysts noting a stark increase in Average Revenue Per Customer (ARPC).

3. Revenue Remix: For the first time ever, commercial clients outspent the government on Palantir’s services Commercial revenue experienced a year-over-year increase of 45%, indicating that the Foundry platform was gaining significant momentum.

4. S&P 500 Debut: Joining the S&P 500 in September was the ultimate coming-of-age moment, earning the company a well-deserved seat at the big kids’ table. The inclusion drew the attention of institutional investors and prompted purchases by index funds, thereby generating further momentum for the stock.

5. After years of being the tech sector’s “perennial promise,” Palantir delivered earnings in the black. Operating margins rose to 22%, supported by enhanced operational efficiency and the distribution of fixed costs over higher revenue levels.

The Business Model

Long-term government contracts serve as the foundation of the company, providing a reliable source of cash flow. Recent partnerships with the U.S. Army and NATO have played a crucial role in its growth. Foundry and Apollo are becoming significant contributors to revenue generation. The net dollar retention rate for commercial clients has reached 120%, reflecting strong upselling initiatives. Ongoing investment in research and development, with an expenditure of $1.5 billion planned for 2024, positions Palantir at the forefront of advancements in AI and machine learning. The AI platform, AIP, has now emerged as a premier solution in natural language processing and real-time analytics.

Technical Insights :~

From a technical analysis standpoint, Palantir’s stock performance in 2024 displayed a classic breakout pattern. After consolidating around $8 for most of 2023, it broke through resistance levels in Q1 2024, accompanied by increasing trading volume—a bullish indicator.  Relative Strength Index (RSI) stayed near overbought territory (above 70) for extended periods, reflecting strong momentum. Meanwhile, moving averages showcased a golden cross in early March, where the 50-day SMA crossed above the 200-day SMA—another bullish signal Institutional ownership rose significantly to 62%, indicating heightened confidence among hedge funds and mutual funds. Concurrently, short interest experienced a substantial decline, decreasing from 12% at the end of 2023 to below 3% by the middle of 2024, as negative sentiment dissipated

The Data Road Ahead Isn’t Always Paved

Even superheroes have their kryptonite, and Palantir is no exception.

Rivals like Snowflake and Databricks aren’t sitting idle. Snowflake’s rapid adoption in cloud-native architectures presents a competitive threat, while Databricks’ focus on open-source models could undercut pricing. Palantir’s surveillance-heavy past occasionally rears its head, making some stakeholders uneasy European markets, in particular, pose regulatory challenges owing to their stringent data protection laws. As a technology stock, Palantir demonstrates significant sensitivity to market variations, similar to a seismograph's response to tremors. A constrictive Federal Reserve or a worldwide economic recession could impede its growth potential.

Eyes on the Future

Palantir’s next chapter hinges on scaling globally and maintaining its AI edge. The company’s push into emerging markets and heavy investment in R&D signal that it’s not just coasting on its 2024 success. With a Total Addressable Market (TAM) exceeding $119 billion across government and enterprise sectors, there’s ample room for growth.

Key metrics to observe include the expansion of gross margins, presently at 81%, the pace of customer acquisition, and the ongoing rise in subscription-based recurring revenues. Furthermore, analysts are noting the potential for Palantir to explore expanding into adjacent markets notably autonomous systems and IoT analytics.

Palantir's journey from the government wunderkind to an AI powerhouse is the perfect example of rejuvenation. Its 2024 breakthrough wasn't a passing fad; rather, t 'was the result of several intricate years of careful scheming, creativity, and perseverance. There is little doubt that Palantir has changed its course for the better and is long longer on the verge of bankruptcy, regardless of whether you are a bull riding the AI wave or a careful observer waiting for the next dip to Black.St.

Published By ~   Atharv Gupta

January 08, 2025