Q1 2024 Newsletter
From the Desk of the Research Team
Welcome to the first edition of the Kurtosis Capital Quarterly Newsletter for 2024. As we navigate through the complexities of the financial markets, our focus remains steadfast on leveraging statistical finance methodologies to engineer exceptional returns for our investments. This quarter, we examine the broader markets looking forward and highlight our high conviction in two names that stand out for their potential: Palantir Technologies Inc. (PLTR) and PayPal Holdings, Inc. (PYPL).
Investment Highlights:
Palantir Technologies Inc. (PLTR)
Entry Point: $8.50
12 Month Price Target: $28.50
Current Designation: Hold
Rationale: Our models identified PLTR as undervalued relative to its growth prospects during 2023. We iterated a strong buy below $10 and have been pleased with company growth through 2024. The company's robust data analytics capabilities and expanding government and commercial contracts provide a solid foundation for future revenue growth. We note that commercial growth is accelerating, and are optimistic that we will see rapid commercial adoption of Palantir’s newest offering, AIP. Our research suggests that competing products are underdeveloped, and present Palantir with a unique opportunity to capitalize on early adoption. Our analysis indicates that PLTR's strategic investments in AI and data integration solutions position it well to capitalize on the growing demand for big data analytics across both commercial and government sectors. Currently, the valuation is rich by standard metrics. Kurtosis will need to see continued acceleration in both commercial and government growth to justify a buy rating in Q2.
PayPal Holdings, Inc. (PYPL)
Entry Point: $59.70
12 Month Price Target: $120.00
Current Designation: Strong Buy
Rationale: PYPL's positioning as a leader in digital payments, coupled with its expansive user base and innovative fintech solutions, underscores its resilience during abrasive market conditions. Our valuation models suggest that PYPL is poised for recovery, benefiting from the e-commerce boom and strategic expansions into new payment platforms and initiatives. The company's commitment to enhancing user experience and security measures further solidifies its competitive advantage. We see the recent price action in PYPL largely driven by market skepticism surrounding growth and CEO transition uncertainty. PayPal has named Alex Chriss as CEO, and we view his innovation and cost-reduction initiatives as compelling. We view PayPal as 50% undervalued on the 12-month horizon.
Broad Market Analysis for 2024:
As we step into 2024, we forecast changes in the broad markets:
Economic Indicators: Early data for 2024 suggest a stabilization in economic growth rates, with inflationary pressures showing signs of moderation. However, central bank policies remain a critical factor to monitor, as interest rate adjustments could influence market liquidity and investor sentiment. Kurtosis anticipates the federal reserve to pivot toward a reduction in rates by Q3 2024.
Market Sentiment: Sentiment analysis indicates cautious optimism among investors. The anticipation of technological advancements and sustainable energy initiatives has fueled interest in specific sectors, but the market remains frothy in the hard tech sector - particularly around AI. We feel it is imperative in this environment to use caution when investing in hard tech and AI companies, assigning inherent skepticism to companies that may be attempting to capitalizing on the AI excitement wave rather than providing valuable and transformative technology.
Forecasting: We project a continuation of volatility in the short term, with potential for stabilization as geopolitical tensions ease and corporate earnings improve. We underscore the importance of diversification across sectors in large portfolios and strategic allocation to mitigate risks associated with market fluctuations in hard tech.
Looking Ahead:
Kurtosis Capital remains committed to identifying high-potential investment opportunities through statistical analysis and market research. Our conviction in PLTR and PYPL reflects our strategy to invest in companies with strong fundamentals, compelling valuation, innovative capabilities, and the potential to deliver sustainable returns.
As we navigate the evolving market landscape, we continue to monitor global economic indicators, policy changes, and sector-specific trends to adjust our strategies accordingly. Our goal is to achieve superior returns by harnessing the power of statistical finance and maintaining a disciplined investment approach.
We thank our readers for their continued trust in Kurtosis Capital. Here's to a fruitful quarter ahead.
This newsletter is for informational purposes only and should not be considered financial advice. Investment decisions should be based on individual risk tolerance and financial goals. Kurtosis Capital does not make personal investment recommendations and only provides research insight.
Contact Information:
For further information and inquiries, please contact our investor relations team.
relations@kurtosis-capital.com
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