Cathie Wood Doubles Down on Palantir Sell-Off Logic
She's Out, & She Doesn't Seem To Want Back In
Cathie Wood loved Palantir, until she didn't. She recently liquidated her entire portfolio of the company, taking a $380M loss on the position.
Many palantir shareholders were obviously confused - why is person who talks about innovation and growth the most on wall street selling off a stock that is arguably the most innovative in the AI/ML/Data Analytics space especially during it's earliest growth stages?
Palantir grew revenue 41% YOY as per their Q4 21' earnings. They have been announcing deals left and right to create platforms using their software for entire industries. They've announced new products with their SPAC companies. They are down 70% from their highs. Why would anyone sell this stock, especially for a close to $400M loss?
The answer given by ARK Invest had to do with slow down in the government sector. Palantir was able to grow governmental revenue from existing clients 47% YOY. This means they were able to land new contracts or expand the deals they had with their current government clients.
However, the number of clients they grew stayed flat at 90 from 2020 to 90 in 2021. In the latest ARK Webinar, they reiterated this point (they originally introduced this argument a month ago as they begin liquidating their position), claiming that the slow down in new governmental client growth was troubling to them.
Their biggest concern is that there is now much more competition in the government space, which will open up governments to be able to easily multi-source vs. single source the vendors that they choose for main contracts.
Cathie Didn't Expect Russia & Ukraine
The Russia Ukraine crisis changed how many people thought about Palantir's ability to grow. CEO Alex Karp has consistently said that "bad times are good for Palantir." It is why they have no debt on their balance sheet and why they bought gold in August 2021 - many believe Palantir expected the world to become more chaotic, not less.
Russia's invasion of Ukraine instantly led people to believe that Palantir's software would be used at the highest of level within various governmental agencies to be able to help mitigate the effects of the crisis. Alex Karp's recent letter also doubled down on the thesis that governments need to actually use data and technology to protect themselves when things go bad, and palantir has the best products in order to accomplish those goals.
I also reported last week that the UK is working with Palantir on their Ukrainian Refugee initiative. This is not speculation - this is on the UK government's website that they are working with Palantir to help make sense of the data needed to match sponsors in the UK (people giving up their homes) to Ukrainian Refugees (people fleeing the crisis from Ukraine that need homes to say in)
Will Cathie Be Wrong?
I expect Cathie Wood to buy into the stock if it begins growing heavily. There are not many companies on the planet that guide for 30% YOY growth and actually execute against that.
Cathie has so far sold at the bottom since the stock is up almost 20% from where she began selling. If her other high-conviction stocks outperform Palantir using the money she got from liquidating to buy the dip in those companies, then it might have been a good bet.
If Palantir begins to grow and the governmental crisis in Ukraine actually accelerates the level of governmental growth they have, it would have been a misstep by Cathie to sell and not trust that Palantir was going to be crucial in the event of a chaotic and messy world.