Palantir Technologies Inc

Palantir Technologies Inc (NYSE: PLTR) is a software entity that provides enterprise data platforms for businesses dealing with complex and sensitive data. It serves organisations across private, public, and non-profit sectors.

Investment Highlights – SELL at USD 26.53

• The stock price has already yielded a stellar ~179% return in the past year. Since its inception, the Company has generated losses, which can be worsened amid macroeconomic instabilities.
• A substantial proportion of its revenue is dependent on limited customers, which can cause credit risk.
• From a technical standpoint, 14-day RSI (70.93) indicates an overbought stance at the current levels, share price retracement is expected in the short-term. Moreover, the stock price is hovering around the upper standard deviation of the Bollinger Bands.
• All major valuation multiples (EV/Sales, EV/EBITDA, Price/Earnings, and Price/Book) are overvalued against the Technology industry’s median.

Key Risks

• The macro-economic disruption can also impact consumer confidence and their spending capacity.
• The Covid-19 disruption can also harm the supply chain and customer demand.
• Volatility in the financial market could also impact the Company’s ability to raise external funds.

Recent News

Contract: On 28 May 2021, Palantir Technologies received a US$111 million contract from the United States Special Operations Command.

Financial Highlights (for the quarter year ended 31 March 2021, as on 11 May 2021)

 (Source: Company Website)

• During Q1 FY21, revenue surged 49% year-on-year as the revenues from US government customers and US commercial customer increased by 83% and 72%, respectively, against Q1 FY20.
• The cash from operations surged by US$404 million year-over-year in Q1 FY21.
• GAAP net loss per share stood at US$ 07.
• As of 31 March 2021, the accumulated deficit balance was US$5.1 billion.

Share Price Chart

 (Analysis done by Kalkine Group) 

Valuation Methodology: EV/Sales Approach (FY21) (Illustrative)

Conclusion 

Despite the significant top-line growth, net losses were worsened in Q1 FY21. Moreover, inflationary pressure, rising Delta variant Covid-19 cases, and other macroeconomic instabilities can keep the trading environment challenging. As we have achieved our short-term upside target, it is better to liquidate at the current level and will wait for a fresh technical level or growth catalyst to re-evaluate our stance in the short term. The stock made a 52-week High and Low of USD 45.00 and USD 8.90, respectively.

Based on an aggravated net loss, macroeconomic instabilities, unfavourable valuation conducted above, we have given an “SELL” stance on Palantir Technologies Inc at the closing price of USD 26.53 (as on 24 June 2021), while we look forward to reviewing that how Company responds post lockdown easing.

Sorrento Therapeutics Inc

Sorrento Therapeutics Inc (Nasdaq: SRNE) is a biotechnology entity focused on developing novel immunotherapies for cancer and inflammation diseases.

Investment Rationale – SELL at USD 10.00

• SRNE is a clinical-stage entity and have incurred significant losses. As of 31 March 2021, the Company had an accumulated deficit of US$955.8 million.
• The stock has given a remarkable ~79.86% growth in the last one year, giving a lucrative opportunity to book profit.
• From a technical standpoint, the stock price is hovering above the upper standard deviation of the Bollinger Bands, while 14-day RSI (70.45) is reiterating the overbought position at the current levels.
• In the past five quarterly results, gross margin and operating margin have remained below the industry median.

Risk Assessments

• There are significant delays in the clinical trials and supply chain disruption for raw materials due to the Covid-19 pandemic, which can impact the Company’s financial conditions and operating results.
• High inflationary risk can create supply-demand imbalances.
• Failure to commercialise the product candidates successfully can fluctuate the stock prices significantly.

Recent News

EUA Approval: Sorrento received EUA (Emergency Use Authorization) approval from COFEPRIS (Comisión Federal para la Protección contra Riesgos Sanitarios) for COVI-STIX™ (COVID-19 Virus Rapid Antigen Detection Test).

Financial Highlights for the quarter ended 31 March 2021 (as on 5 May 2021)

 (Source: Company Website)

• SRNE generated revenues of US$14.3 million in Q1 FY21 against US$7.7 million in Q1 FY20.
• The Company’s R&D expenses for the quarter were US$43.8 million and in the same quarter the previous year, the expenditure was US$21.2 million. The increase was mainly due to the expenses incurred for the advancement of RTX, COVID-19, SP-102, oncolytic virus, ADC, and oncology programs.
• The Company spent aggressively on the selling and distribution expenses as it incurred US$43.4 million in Q1 FY21, while in Q1 FY20, it was US$26.3 million.
• It also reduced its interest expenses mainly due to interest expense associated with the Oaktree term loans.

Share Price Chart

 (Analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (FY21) (Illustrative)

Conclusion

Sorrento Therapeutics has shown a solid top-line and bottom-line growth in the first quarter of FY21 since its Covid-19 therapies paid off well. In the last month time frame, the stock has given a sizeable return of over 41%. It has also met our short-term upside target and giving an incredible opportunity to book profit at the current level. Now, the stock price is trading in the overbought territory and can lead to share price consolidation amid macroeconomic uncertainties. We will re-examine the upcoming growth catalyst at a fresh technical level, and then capital plus gains can be reinvested for a better return. The stock made a 52 week High and Low of USD 19.39 and USD 5.17, respectively.

Based on the exceptional monthly gains, overbought technical stance, economic instabilities, unfavourable valuation conducted above, we have given a “SELL” stance on Sorrento Therapeutics Inc at the closing price of USD 10.00 (as on 24 June 2021), while we look forward to reviewing the market acceptance of COVI-STIX™.

XL Fleet Corp

XL Fleet Corp (NYSE: XL) is a provider of vehicle electrification solutions to improve vehicle fuel economy. It serves commercial and municipal fleets in North America.

Investment Rationale – SELL at USD 8.79

• XL was not immune to the challenging times as the OEM delays continued to impact the entirety of the automotive supply chain.
• Rising inflationary pressure and semi-conductor shortage can impact the vehicle’s input costs, and the Company fail to serve customers at desired prices.
• From a technical standpoint, XL’s stock price is sustaining below the 100-day EMA (USD 9.66), reflecting a bearish momentum. Meanwhile, the momentum oscillator 14-day RSI (62.51) is moving towards the overbought position at the current levels.
• In the past five quarterly results, gross margin and operating margin have remained below the industry median.

Risk Assessments

• XL is exposed to risk associated with early-stage and emerging growth entities.
• The Company is dependent upon external funding for pursuing growth opportunities.
• Inflationary pressure and macroeconomic instabilities can keep the trading environment challenging in the short-term.

Recent News

Agreement: On 24 June 2021, XL collaborated with Rubicon (a software platform) to Accelerate Fleet Electrification in the Waste and Recycling Industry.

Financial Highlights (for the first quarter ended 31 March 2021, as on 17 May 2021)

 (Source: Company Website)

• XL had a challenging Q1 FY21 amid economic slowdown as it generated merely US$0.7 million in revenue, compared to US$1.2 million in the prior year.
• Net income was US$61.9 million for the first quarter of 2021, compared to net loss of US$6.5 million in the first quarter of 2020.
• At the end of Q1FY21, the Company had a cash balance of US$404 million.
• The Company also announced the highly complementary acquisition of World Energy which would accelerate the build out, expansion and capabilities of XL Grid division.

Share Price Chart

 (Analysis done by Kalkine Group)

Conclusion

XL’s rapid growth may not be sustainable as the Covid-19 uncertainties can still impact the operating results, cash flows, and financial conditions. Moreover, the management has acknowledged that supply chain concerns and raw material shortages will continue to affect the business in the short term. The corporation is debt-free, demonstrating its sound financial situation. However, market uncertainties, seasonality factors, and subdued demand keeping the outlook uncertain in the short-term. Therefore, it is rational to book profit and reinvest when the market offers significant growth drivers and have better clarity for the outlook. The stock made a 52 week High and Low of USD 35.00 and USD 5.41, respectively.

Based on the uncertain outlook, history of losses, challenging market conditions, we have given a “SELL” stance on XL Fleet Corp at the closing price of USD 8.79 (as on 24 June 2021).  

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

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