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May 15th, 2023 | 07:30 CEST

PayPal, Defiance Silver, Palantir - The rebound is firmly in sight

  • Mining
  • Silver
  • Digitization
  • Software
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In the dynamic and volatile financial markets, finding investment opportunities that offer above-average returns is a constant challenge for investors. One way to achieve significant outperformance compared to the overall market is to identify promising rebound candidates that have experienced a disproportionate decline in value following weak earnings or other negative events but are likely to stage a comeback due to their business model.

time to read: 4 minutes | Author: Stefan Feulner

Table of contents:

    Palantir - Positive momentum after the numbers

    With the figures for the first quarter, Palantir achieved an operating profit for the first time in the Company's history. The US data analysis company was able to convince its critics this time. As a result, the share price rose by around 33% in the two following trading days after publication and equalled its previous high for the year of USD 10.30 to the dot. Since then, the volatile share has been consolidating and reducing the overbought condition of the last few trading days. Support is provided by the upward trend established since the end of December 2022 at USD 9.05. Furthermore, the rising 200-day moving average runs at USD 8.74.

    In a letter to investors, CEO Alex Karp highlighted the positive developments. In the first quarter, a net profit of USD 17 million was achieved. The Company boss expects Palantir to be profitable in every single quarter by the end of the year. Revenues for the first three months of the year were USD 525 million. For the full year, Palantir expects revenues in the range of USD 2.185 billion to USD 2.25 billion, with adjusted operating profit expected to be between USD 506 million and USD 556 million.

    Following the convincing outlook, ARK Investment, led by star investor Cathie Wood found itself among the buyers. A total of 4.37 million shares of the data analytics specialist were bought for the ARK Innovation ETF and the ARK Next Generation Internet ETF. Also positive, though not enthusiastic, was Jefferies Financial Group, which raised its price target from USD 8.50 to USD 10.

    Defiance Silver - In concert with the big players

    For two reasons, long-term high rebound potential is also attributed to the metal silver. Firstly, the precious metal, like gold, is considered a hedge against inflation and a safe haven in uncertain geopolitical and fiscal times. Secondly, the demand for the industrial metal, considered the best electronic conductor among metals, is growing considerably due to the energy transition and digitalization.

    Due to both the growing demand and the limited supply, producers and explorers of this scarce commodity, especially from the Western world, will naturally profit in the long term. Defiance Silver, with a market capitalization of CAD 24.60 million, has the best prerequisites for outperformance. In addition to a management team with decades of track record in mine development and mergers & acquisitions, the explored properties have a robust resource base and significant exploration potential. The main focus is on the historic Zacatecas silver district, which is considered Mexico's largest silver producer and second-largest copper producer. Historically, more than 1 billion ounces were produced here. Not without reason, major producers such as Pan American Silver, Fresnillo, Newmont, and Agnico Eagle are located in direct proximity to Defiance Silver's Zacatecas projects, which include the flagship San Acacio mine, the wholly-owned Lagartos mine, as well as options on the Lucita and Panuca properties.

    The most advanced projects, San Acacio and Lagarto, are located on the prolific Veta Grande and Mala Noche vein systems and thus have a similar geological setting to the Fresnillo Complex, one of the world's largest primary silver mining complexes. In 2022 alone, 16.9 million ounces of silver were produced there. An initial resource estimate of 16.9 million ounces of silver has already been determined for San Acacio based on 44 drill holes totalling 10,200 m. Since then, a further 20,000 m has been drilled, and significant intersections outside the current resource have been identified. Drilling results are expected to be submitted in a timely manner. A program of at least 5,000 m is planned for this year, along with a resource update.

    In addition to the Zacatecas projects, Defiance Silver has another high-grade asset in its portfolio, the Tepal Gold and Copper Project, where the NI 43-101 resource estimate identified 1.8 million ounces of gold and 813 million pounds of copper. In addition, the 2027 pre-feasibility study showed significantly favourable production costs of less than USD 400 per ounce of gold on average for the industry. So far, around USD 20 million has been invested in the project in Michoacán near the border with the state of Jalisco.

    The Company is currently sitting on a cash cushion of CAD 8.0 million. In addition, the drilling programs for this year are fully financed.

    PayPal - Excessive sell-off?

    In contrast to Palantir, the payment service PayPal experienced a real sell-off after the publication of the figures for the first quarter and the outlook. As a result, the share plunged by around 20% and hit a new six-year low of USD 61.69. While earnings estimates were exceeded and profit forecasts for the second quarter and full year 2023 were revised upward, it is expected that revenue in the second quarter will increase by 6.5% to 7%, while earnings per share for the end of the fiscal year 2023 are projected to be USD 3.42, compared to USD 2.09 per share in 2022.

    What has not only raised concerns among analysts is the limited expansion of operating margins. While the Company expects the non-GAAP operating margin to increase by 100 basis points this year, analysts were anticipating 125 basis points. During a conference call, the Company also highlighted its efforts in artificial intelligence, as it expects new advancements in generative AI to accelerate its productivity initiatives. "We anticipate that AI will significantly reduce our costs in the coming years," said CEO Dan Schulman, adding that the Company intends to use the technology to introduce new features for merchants and consumers on its platform.

    French bank BNP Paribas downgraded PayPal's stock to "neutral". It also lowered its price target to USD 92 from USD 108.

    Palantir punished its critics with the first operating profit in the Company's history. In contrast, PayPal disappointed with its margin performance. Defiance Silver should profit from the long-term rising silver price due to its first-class projects.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Stefan Feulner

    The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
    He is passionate about analyzing a wide variety of business models and investigating new trends.

    About the author

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