Palantir's 4th Partnership In A Week

+ a big day for stocks

Welcome back to DailyPalantir! We have a lot to discuss today — a new Palantir partnership, how the Fed’s decision effects Palantir, and more. Let’s get into it!

Palantir announced their 4th commercial deal in the past week, a short PR, down below:

This news comes after 3 partnerships in the last week:

- a $40M Fujitsu extension in Japan

- a new partnership with PlasCred, a waste management company

- a new partnership with HISA, the Horse Integrity Safety Authority all deals leveraging Foundry & AIP

It’s nice to see towards the end of the year that Palantir is racking up more international commercial deals — the extension with UniCredit signals a few things:

1/ Palantir’s work with the bank has been productive since 2018 and the banks sees further opportunities to expand the partnership by making Foundry an integral operating system for their enterprise.

2/ Palantir is continuing to penetrate the financial sector — we know a select few banks they work with, like JPM and RBC, but Palantir has not actively gone after this market. They’ve chosen to focus more on healthcare, manufacturing, and energy. Seeing them get a 5-year extension with a bank to implement AI/ML for standard bank procedures makes me feel they can eventually go harder for gaining broader momentum in the financial sector.

3/ Palantir’s average revenue per client is 2.9M — I wouldn’t be surprised if this deal was around $10-12M over 5 years, about $2M per year, which is not a bad deal to lock in Q4. Given the deals we’ve seen, hopefully we can get customer count to grow at 9-10% next quarter, which would be up from the two consecutive quarters of 8% growth that we’ve seen.

Macro News as Palantir Hits $18 After Hours

Today was a really important day for the market — especially for growth stocks like Palantir — because Jerome Powell and the Fed made their decision on if rates would get cut, paused, or hiked.

The decision: interest rates will be paused, and the fed is now signaling 3 cuts, bringing the fed funds rate to 4.6%, by 2024. This doesn’t guarantee 3 cuts will happen, but it’s what the Fed believes can happen if things go according to their plans.

This was a big deal.

Last time the Fed put out their projections, they signaled for a 5.1% Fed Funds rate by end of 2024 — now at 4.6%, it is dramatically lower than what they previously thought, and that has the markets excited to put money into equities again.

If you are going to invest in Palantir, it is incredibly important to have an understanding of what is happening in the macro-economic landscape. The reason for this is because Palantir is a growth stock, so even though they have no debt and $3.3B in cash, interest rates being high do effect the market’s willingness to invest in more speculative names like Palantir (especially when they can get 5% risk free from US treasury bonds) and if rates are high, the potential clients that would buy Palantir’s software may not have the capital to afford procuring it, leading to slower revenue growth.

Rates going down help Palantir & other growth stocks immensely.

Two key things to look at as the Fed made their decision today:

1/ The 10-year yield:

The 10 year is a treasury bond investors can purchase to enter into a fixed contract with the US government to help them finance their debt. Two months ago, this was at 5%. That was bad — higher rates mean more people were selling off bonds (which caused the yield to go higher) making the 10year more attractive than equities, because you were guaranteed 5% on your money for taking zero risk.

As the 10 year comes down (because of the potential of rate cuts), equities look more attractive, leading to growth names (and now profitable names) like Palantir, doing much better.

2nd - Money Market Funds

Money market funds are funds where investors can put their cash in and get 5-5.5% on their cash for virtually no risk at all. As of November 30th, there was close to $6T in these funds — this is incredibly important to understand because it essentially means that there are 6 trillion dollars on the sidelines, NOT in the stock market.

As the Fed lowers rates, those money market funds can’t create the easy 5% they were getting, which means some of that money will enter into the stock market — as the market gains more liquidity, more assets will have room to go higher, and growth names like Palantir should benefit.

Now, even though all of this macroeconomic news has been good — Palantir still has to perform. If the company cannot justify the premium they are being given by the market with stronger growth, the market will inevitably take away the premium. But if the company can grow, and the macro is in their favor, 2024 could be an exciting year for Palantir — it just depends on if they can capitalize on the opportunity and execute.

Remember When…

Remember when I said, a few newsletters ago, that Snowflake was copying Palantir with their bootcamp strategy?

Well, either someone from the Motley Fool also thought the same or they read my newsletter and decided to make a whole article out of it.

Regardless, people can tell that Snowflake is copying Palantir — and I love it:

The name of the article was: This Artificial Intelligence (AI) Company Just Took a Page Out of Palantir's Playbook — It seems like other people are noticing that Palantir was first to innovate with a product driven bootcamp strategy, and competitors are taking notice.

That’s it for today - thank you as always for reading. I’ll see you in your inbox tomorrow!