What’s Pressuring Palantir?

As expected, the Federal Reserve left the federal funds rate unchanged exiting its January policy meeting, and next up, we’ll hear from Fed Chair Powell. I continue to expect him to say monetary policy is in a good place, the Fed is monitoring incoming data, and the central bank remains data dependent. Wash, rinse, repeat.

While we wait for that, let’s discuss the moves we are seeing in the shares of Axon (AXON) , Palantir (PLTR) and Carvana (CVNA) , part of our EPS Diplomats basket.

Axon

Some members flagged that Axon shares are under some pressure on Wednesday, inquiring as to what is driving that given the lack of fresh news or headlines. In the Forum, I shared the following:

"No news, which likely means it's tied to what is happening in Washington re: shutdown and Department of Homeland Security (DHS) 'blank check' funding. Remember, Federal is one of the smaller pieces in Axon's total available market. All other signs point to continued adoption in public safety, especially when it comes to AI.

"I'm stealing some of my own thunder from Friday's January Monthly Roundup, but...

"The global public safety and security market is expected to grow from an estimated $581.9 billion in 2025 to approximately $1.63 trillion by 2034, led by technology and software segments. Per Deloitte, AI adoption in public safety is rapidly accelerating, shifting from experimental pilot programs to integrated, daily operations designed to improve efficiency and resource allocation. A first responder survey conducted by Lexipol found that 40% of agencies surveyed are starting to use AI or are researching the use of AI, 12% use AI on a daily basis, and 6% 'rely on' AI during emergency-response operations. What stood out to us was the 40-percentage-point year over year increase in the 71% figure that reflects 22% of respondents describing AI as 'a top priority' in the future of public safety, and 49% called AI 'important' to public safety."

That said, we would look for the shares to stabilize and some clouds to clear when it comes to the government shutdown and DHS funding.

I’ll clarify Axon’s end market opportunity for U.S. federal relative to its $159 billion total addressable market (TAM). The U.S. federal pieces are about $12 billion, or 7.5% of its TAM. Far greater opportunities exist in the U.S. state level and local public safety, enterprise, and international government areas. Those three end markets account for about 90% of Axon’s total addressable market.

Palantir

The renewed pressure on Palantir shares has them trending toward their 200-day moving average at $158.34. When we recently picked up some additional PLTR shares, we indicated that if PLTR shares weakened further, we may add further to the position. Ahead of the company’s quarterly results after Monday’s market close, we’ll want to closely watch the technicals over the next few days to see if that support level holds.

We continue to see Palantir’s business benefitting from the growing adoption of AI and, as we saw with its expanded relationship with HD Hyundai, increasing usage of AI in the enterprise. When it comes to Monday’s earnings report, we will remind you that one area of focus will be on Palantir’s remaining performance obligations (RPO). Exiting September, Palantir’s total RPO stood at $2.6 billion, of which $1.14 billion was classified as short-term RPO and the remaining $1.46 billion as long-term RPO.

Carvana

A few members flagged the drop in Carvana shares, and the culprit seems to be a “report” penned by the folks at Gotham City Research (GCR), which appears to focus on short selling, and yes, it has disclosed a short position in CVNA shares.

Their “report” says that in, GCR’s view:

Carvana's 2023-2024 earnings are "overstated by $1 billion+, and far more dependent on related parties than disclosed."

CVNA 2025 10K will be delayed, 2023/2024 10Ks restated, and Grant Thornton will resign as auditor.

According to TipRanks, CVNA shares have 18 analyst ratings, 16 Buys and 2 Holds, with JPMorgan’s target at $510 and Citi at $550.

Remember, our position in CVNA is small, and as part of our EPS Diplomats basket, its presence is predicated on robust earnings of late as well as the market’s expectation for that to continue this year and next. Even after updating the EPS Diplomats model to account for Wednesday's move in CVNA, it’s still up more than 10% since we reconstituted the basket at the market open on January 2.

All of that said, it seems pretty clear that GCR is talking up its book and could very well have covered its short after the 20% drop in the shares on Wednesday.

More Pro Portfolio

At the time of publication, TheStreet Pro Portfolio was long AXON, PLTR and CVNA.