Palantir, like Hundreds of Startups Designed to Lose Money and Bamboozle Investors, Runs out of Bamboozle: -84% from High

May 10, 2022

Those that believed the hype and hoopla and didn’t get out in time got thackamuffled.

By Wolf Richter for WOLF STREET.

Palantir Technologies, which went public in September 2020 via a direct listing amid enormous hype and hoopla, has now earned a much coveted spot in my Imploded Stocks column.

Today, Palantir reported another huge loss, this time $101 million, on $446 million in revenues, bringing its total loss over the past four years, to $2.86 billion. Its revenue outlook for Q2 was below what Wall Street expected. Shares [PLTR] kathoomphed 22% so far today, and 84% from the peak in January 2021, to $7.40 a new all-time low. They’re down 26% from the first trade in September 2020 (data via YCharts):

The intelligence startup sells automated data analytics systems to the Pentagon, CIA, NSA, ICE, and other federal agencies, and to state and local agencies, including to police agencies. Feeding at the public trough of government agencies in this manner sounds awesome for Wall Street in a grisly sort of way.

Palantir became infamous when it emerged that police departments were using Automatic License Plate Reader systems (ALPRs) that take images of every license plate (plus of the vehicle and occupants) that comes into view, and that Palantir’s software was used to comb through the data. But for Wall Street, it just fed into the hype and hoopla — think of the unlimited prospects of these systems being installed in every city around the country and the world!

When the company went public in September 2020 via a direct listing, shares started trading at $10, giving it an inexplicable market cap of $16.5 billion. Shares where then whipped to $45 intraday by January 27, 2021, more than quadrupling in three months, giving the company an even more inexplicable market cap of around $80 billion, which shows how crazy this whole sh*tshow had gotten. And then shares got shookalacked.

The company has been marketing its software and services to corporate customers, but government customers still produce over half of its revenues, and revenue growth in the government segment slowed to 16% year-over-year, Palantir reported today in its earnings release, the slowest since the company began disclosing it as a public company in 2020.

But Corporate America, which has been profoundly immersed in surveillance of consumers and competitors, is the bright spot: Revenues to US companies jumped by 136% year over year, and total global commercial sales rose 54%.

So the business of selling surveillance technologies of all kinds to government agencies, Corporate America, and global companies is thriving. And revenues at Palantir are growing, though more slowly, amid a huge appetite for more surveillance and better analytics of the data thus obtained.

It’s just that Palantir keeps losing a ton of money doing so year after year. It’s like the big taxi enterprises Uber and Lyft losing a ton of money year after year, despite their huge revenues. Or like the huge used-car dealers Vroom and Carvana losing a ton of money selling used cars; and they now entered an existential crisis.

And even if Palantir were to ever make a net profit of $100 million a quarter (instead of losing $100 million a quarter), it would amount to earnings per share of just 5 cents at the current number of shares outstanding, and a year of that would amount to EPS of $0.20, and with a PE ratio of maybe 20, if revenues continue to grow, it would amount to a share price of $4, if the company ever figures out how to get there.

They and hundreds of others all operated on the same principle. None of these companies were ever designed to make money. They were designed to bamboozle investors. And that worked for a while but started coming apart company by company in February 2021. And those stock jockeys that didn’t sell in time got thackamuffled.

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