MarketBites Daily Investment Commentary: Cruise Stocks Surge On Negative News? I Palantir Earnings Flop

Stock Market Commentary for 2/17/2021:
  • The Big Picture:
    Stocks closed a bit lower, as Treasury yields jumped to their highest levels since February 2020. Real estate, utilities, consumer staples, and technology stocks sold off as yields rose. Banks jumped, since higher yields benefit their business. Energy stocks rallied, as freezing conditions in Texas continue to drive up energy prices. Bitcoin topped $50,000/coin.
  • Stock Talk:
    The Winner of the Day: Churchill Capital IV
    The 31.82% surge in their stock came from rumors that the shell company will merge with Lucid Motors (essentially bringing the EV manufacturer public via a SPAC). The rumors haven’t been confirmed yet though!
    What’s Moving Pre-Market:
    Verizon 
    and Chevron rise on Buffett investment. SolarEdge and QuantumScape jump.
    The Loser of the Day: Palantir
    Palantir dropped, as growth is expected to moderate below Wall Street’s expectations in the near term. Palantir estimates 30% growth annually over the next 5 years.

 

  • Special note for our followers:  We started MarketBites with a mission to help people make sense of confusing Wall Street news. Never in our wildest dreams did we imagine our following would grow by the thousands in mere months. Today, we feel even stronger about executing our mission. We at Taylor Hoffman (owner and operator of MarketBites) are investment professionals with the vision of democratizing Wall Street. To that end, we have been tirelessly working on a Fintech Investment App that’s built on transparency, trust, and openness. 
  • The Data Room:
    – Per Johns Hopkins, the U.S. reported 52,904 new Covid-19 cases yesterday. So far, 39.6 million Americans have received their first round of vaccinations.

– By Raymond Kanyo

 


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Top Investment Story #1: Cruise Stocks

What is Happening?

Royal Caribbean (+9.70%), Carnival (+9.68%), and Norwegian (+7.01%) cruise stocks surged in Tuesday’s trading on arguably negative news. Now that’s confusing.

Why does this Matter?

Royal Caribbean is still down 45% from pre-Covid levels. The company has lost $1.4 billion in each of the last 3 quarters (compared to a $2 billion profit in 2019). Last Friday, Norwegian joined Royal Caribbean and Carnival, in shutting down almost all cruise operations until May 2021. On top of that, investment bank “Berenberg,” downgraded cruise line stocks across the sector. Berenberg fears that cruise lines won’t return to normal until 2025.

But against all odds, cruise stocks surged. Why? The global vaccination effort is progressing well. Cruise lines are thinking about offering trips to vaccinated guests sooner than some might think.

  • Bulls say: There is huge pent-up demand for cruising, which will translate into great sales for the next few years, once the industry is fully reopened.
  • Bears say: Cash burn could get too big, and Royal Caribbean and other cruise stocks will have to raise equity or restructure (materially hurting shareholders).
The Takeaway:

The surge in cruise stocks amid negative news underlines the inherent risks and volatility of this industry. Vaccination efforts may make or break these stocks in the coming months.

Liked this story? Forward it to your friends 

– By Raymond Kanyo

– Published in MarketBites Daily Newsletter


Top Investment Story #2: Palantir Craters After Earnings
What is Happening?

Palantir’s stock price fell to $27.84 (-12.75%) Tuesday, after a disappointing earnings report during the after-hours session.

Why does this Matter?

$PLTR has been a hot stock since it entered the market at $10/share, via a direct listing in September of 2020. The current fall is the largest the company has experienced since its public debut.

Palantir beat analyst expectations on revenue ($322M vs $300.7M), but the firm’s operating loss of $156.7M left a sour taste in the mouths of investors. Most of this loss stemmed from stock-based compensation, and the accompanying payroll taxes involved in such transactions. When adjusted without stock-based compensation, the firm earned 6 cents per share last quarter.

Palantir continues to prove its ability to acquire lucrative government contracts. Government contracts accounted for $190M of their total revenue in Q4, up 85% when compared to the same time frame in 2019. The firm’s commercial clients experienced 4% revenue growth, proving again that Palantir’s executives are focused on government assistance.

Palantir brought in a few impressive names during Q4, including PG&E, the United States Air Force, and the Food and Drug Administration. “Palantir Gotham,” the platform developed for government intelligence and defense agencies, has been the main driver for growth at the firm.

The Takeaway:

Palantir executives urged shareholders to be long-term oriented. They believe that the reaction to today’s news is no more than a bump in the road, and that Palantir’s moat is only widening. Palantir brass expects that the firm’s best days lie ahead.

– Written By Jack Dunne

– Published in MarketBites Daily Newsletter


Meet the Authors

Raymond grew up in Budapest, Hungary, where he played tennis for the Hungarian Junior Davis Cup team. At the age of 16, he received the Davis United World College Scholarship, which was established by legendary investor Shelby Cullom Davis, allowing him to attend the Taft Boarding School in Watertown, CT. After Taft, Raymond received a Presidential Scholarship to the Robins School of Business at the University of Richmond, where he studied Quantitative Economics and Finance. Raymond is a CFA Level III Candidate. Prior to joining Taylor Hoffman, Raymond worked at various financial institutions in the insurance, asset management, and financial consulting space. Outside of the office, Raymond enjoys playing tennis at ACAC and Westwood Country Club.

Raymond Kanyo
Product Manager & Investment Analyst

Jack graduated from the Robins School of Business at the University of Richmond with concentrations in Marketing and Finance in 2019. Prior to joining Taylor Hoffman, he worked in high-growth B2B SaaS marketing; assisting Fortune 100 firms to improve their web performance experience. A Long Island New York native, Jack’s hobbies include passionately supporting the Mets and Islanders, and he enjoys skiing whenever he can.

Jack Dunne
Investor Education Specialist
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