Shares of data-mining and analytics company Palantir (NYSE:PLTR) fell 6.9% in the morning session after Federal Reserve Chairman Jerome Powell delivered the Semi-Annual Monetary Policy Report to Congress. The Fed Chair remarked that further interest rate hikes are expected by the end of the year. He added that "inflation pressures continue to run high, and the process of getting inflation back down to 2 percent has a long way to go." In June 2023, the Federal Open Market Committee decided to hold the target range steady to evaluate additional information and the impact on monetary policy. There was hope that interest rate hikes would be paused for the short to medium term. As a reminder, higher rates generally hurt stock prices, as today's stock price is the present value of future cash flows discounted at a discount rate. The higher the prevailing interest rate environment, the higher that discount rate. In addition, higher rates particularly hurt higher-growth stocks such as tech names since investors must discount financials further out in the future back to the present.
What is the market telling us:
Palantir's shares are very volatile and over the last year have had 42 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. The previous big move was about one month ago, when the stock gained 15.1% on the news that the company reported first-quarter results that beat analysts' revenue, free cash flow, adjusted EBITDA, and earnings per share estimates. Customer growth also came in strong, rising by 41% year-over-year and 7% sequentially. However, revenue guidance for the next quarter came in below Consensus. Despite this, management noted that the company is expected to remain profitable every quarter through the end of the year. Additionally, the company provided some updates on the adoption of its AI technology, stating that "the depth of engagement with and demand for Palantir's new Artificial Intelligence Platform (AIP) is without precedent." Overall, the company's Q1 results continued to highlight the improvements in cash management and profitability.
Palantir is up 128% since the beginning of the year, but at $14.55 per share it is still trading 12.3% below its 52-week high of $16.60 from June 2023. Investors who bought $1,000 worth of Palantir's shares at the IPO in September 2020 would now be looking at an investment worth $1,530.
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