We're thrilled to reaffirm our hold rating on Palantir (NYSE: PLTR). The excitement around Palantir's potential in the world of AI is palpable, and we believe it's uniquely positioned to capitalize on this growth opportunity, particularly with its strong foothold in the U.S. government, its robust presence in military and defense services, and the recent launch of AIP. However, it's important to temper expectations for significant short-term stock outperformance. As anticipated, the stock's surge during the first half of 2023, driven by AI hype, has cooled off somewhat in the latter part of the year.
Even the recent eye-catching $250 million deal with the U.S. Defense Department for AI and machine learning research and development hasn't altered our near-term outlook. While this deal did propel PLTR upwards by 14% over the past five days, compared to a 1% drop in the S&P 500 during the same period, we believe the market is getting ahead of itself in anticipating how much this will impact Palantir's profit growth. Service-oriented deals typically yield lower margins than software deals, and Palantir is still grappling with slower software deal growth. In the first half of FY23, the company faced a deceleration in government and commercial revenue growth, with total revenue matching expectations despite the AIP launch.
Our view is that Palantir is overhyped in the AI space and is trading at a premium valuation, creating an unfavorable risk-reward profile for the latter part of 2023. Furthermore, the challenge of monetizing AI, particularly AIP, remains a pressing issue. AIP monetization is currently limited, and we don't believe the increased visibility from government deals will offset the cost-cutting environment expected in the second half of 2023. The Federal Reserve is advocating for a "higher-for-longer" strategy, and budget constraints persist amid macroeconomic uncertainty.
While we're optimistic about Palantir's swift AIP launch and its extensive experience in AI and data mining, we don't see a clear path to short-term growth for the stock. We expect Palantir will struggle to accelerate organic growth enough to justify its higher multiple. Consequently, we recommend investors stay on the sidelines, as we don't foresee the stock performing well in the latter part of 2023.
Shifting gears, SoFi Stadium, the spectacular home of the Los Angeles Rams, has revolutionized the NFL venue landscape with its modern, indoor-outdoor design and colossal oculus-shaped videoboard, the largest in the league.
Now, SoFi Technologies is venturing into the world of golf with great enthusiasm. The digital personal finance company has proudly stepped up as the presenting sponsor for the cutting-edge team golf league developed by Tiger Woods and Rory McIlroy's TMRW Sports venture, set to launch in prime time come January 2024.
What's more, the league's purpose-built arena in Palm Beach, Florida, spanning an impressive 250,000 square feet, will bear the name "SoFi Center." This long-term partnership feels like a natural fit between two forward-thinking tech companies, marking SoFi as TGL's inaugural commercial partner. Situated on the Palm Beach State College campus, the SoFi Center boasts seating for nearly 2,000 fans around a playing area roughly the size of a football field. Inside the towering air-supported dome, reaching a height of 75 feet, players will tee off into a gigantic 46-foot by 64-foot screen, approximately 20 times larger than a typical golf simulator screen. It's an exciting fusion of technology and sports innovation.
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Disclosure: This video was done by myself, and it expresses my own opinions. This is not investment advice or financial advice and it should not be taken as investment advice or financial advice in any way shape or form. I am not receiving any form of compensation for this video from the company or organization that I am expressing opinions about. This video is for entertainment and or educational purposes only.
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