Making the world smarter, happier, and richer. Today, Palantir trades at $22, for a $42 billion market capitalization. AMZN's share count was up 12% but price was up 1.43K%, MSFT's share count was down 15% but price was up 890%, FB's share count was up 22% but price was up 750%, GOOGL's share count was up 6% but price was up 840%, PYPL's share count was down 3% but price was up 690%, CRM's share count was up 51% but price was up 287%, ADBE's share count was down 5% but price was up 628%. Analyst Report: Palantir Technologies Inc. NYSE - Nasdaq Real Time Price. Of particular concern was the approximately 17.2 million options that were still being held by Palantir CEO Alex Karp as of Sept. 30. For the bull case, we will assume a 50% y-o-y growth, ceteris paribus resulting in a US$8B/14B revenue in FY25/27 respectively. With a market cap of $36 billion, Palantir is still valued at 24 times this year's sales. Perhaps I'm wrong here but to my eyes there's not an obvious correlation between share count and capital gains over 10 years. General assumptions include: XYZ firm would have been able to purchase the securities recommended by the model and the markets were sufficiently liquid to permit all trading. Cost basis and return based on previous market day close. Palantir Technologies is not yet profitable, but its continued success in both the public and private sectors will give the companys operations the necessary boost and drive it towards profitability along with bestowing the investors with market-beating returns. Backtested results are calculated by the retroactive application of a model constructed on the basis of historical data and based on assumptions integral to the model which may or may not be testable and are subject to losses. If Palantir was growing its government side of the business at the exclusion of its commercial side, it would be concerning. Palantir revenue has been increasing over the years. Turning to Wall Street, PLTR stock has a Moderate Sell consensus rating. Palantir can implement solutions quickly. And the companys overall revenue was up 36% YOY at $392 million. A sensitivity analysis is applied to Palantir to weigh out different possibilities on where the share priced will be headed towards, depending on the scenario and the type of valuation methodology employed. In the first nine months of 2021, its revenue rose 44% year over year to $1.11 billion, while its net loss narrowed from $1.02 billion to $364 million. I am not receiving compensation for it (other than from Seeking Alpha). Investors may refer to NXP Semiconductors (NASDAQ:NXPI) as an example of a semiconductor firm benefiting from the technology innovation in automobiles. Of particular concern was the approximately. We essentially have built a food ontology that provides nutrition in mission critical systems. Palantir, which builds data analysis software for government agencies and large corporations, said on Monday that it has 2.17 billion diluted shares. In the Q3 2021 earnings conference call on Nov.9, he said, legacy compliance solutions are often 2 or more decades behind. For now, investors should assume the stock is stuck in a $22 $27 trading range because earnings per share are not expanding. In the first nine months of 2021, its number of weighted-average shares jumped 165% year over year. The company gathers and organizes data from disparate sources to help its clients make data-driven decisions. I hope to see you inside Growth Stock Renegade. So been balls deep in Palantir since it went public in September. And as Hake notes, even if investors have to wait two years for the stock to hit that target, they would still get an average annual return of 29.54%. Please. Someone else is enjoying the rewards. Palantir worked exclusively for the U.S. Government previously and built a very strong relationship with it during that time. In 2004, when we looked at the available technology, we saw products that were too rigid to handle novel problems, and custom systems that took too long to deploy and required too many services to maintain and improve. SHARE THIS POST WACC (Fig 4) is estimated at 8.5% for Palantir. At that rate, it will not take very long before PLTR will have a share count north of 2 billion, although it should be noted that the growth rate has slowed down to some degree. It also announced it would accept payment in Bitcoin (CCC:BTC-USD), although according to a company spokeswoman, Palantir has not received any payments in the cryptocurrency. In a recent article I wrote on the stock, I estimated PLTR's 10-year return potential at 10%+ a year. Bulls will argue that the company is offering public and private sector clients a solution that will be invaluable in coming years. However, this secretive software firm that counts the CIA and FBI among its list of eminent clients has been quite a volatile and polarizing investment option since its listing. Thanks for pointing this out. Palantir expects revenue will grow by 40% to $1.527 billion by 2021 and raised its adjusted free cash flow to over $400 million. Palantir is a high-growth company that operates worldwide in both commercial and government segments. Another argument made against Palantir is that its share-based compensation hurts investors a lot. When employees start to exercise these rights, (1) future dilution and (2) decreased free cash flow will occur, slashing the fair value per share to a lower price. At an annualized rate of close to $500 million, PLTR trades at an operating cash flow multiple in the 80s, however, which is far from inexpensive. The future looks bright. Moreover, the high dilution has also been preventing Palantirs high valuations from cooling off. However, I need to point out a few things. And I can certainly understand if investors might wonder why the company chose to deploy capital in this way as opposed to buying back shares. Forget Tesla! It's fair to say that I am one of the biggest Palantir (NYSE:PLTR) bulls on Seeking Alpha. Stock Prodigy Who Found NIO at $2 Says Buy THIS Now, Man Who Called Black Monday: Prepare Now.. On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. Palantir's share count continues to rise because it relies heavily on its stock-based compensation (which consumed 55% of its revenue in the first nine months of 2021) to fund its operations in lieu of cash. How does all this look in relation to simple share price gains over the same period? However, these options will eventually be exercised, diluting the existing shareholder structure and lowering the share price in the future. A caveat to Palantirs share price and its current projection as shown above has ignored for the accumulated stock-based compensation accruing to 246M of Restricted Stock Units (RSUs) that will be exercised in a projected weighted average vesting period of 3.2 years (166M current, 80M projected from 20222025). Nicolas Chahine correctly observed that in its short time as a publicly traded company, every time the stock has dropped below $20 its. News / Events / Financials. At this point, I've written well over 20 articles on the company. For example, it set up an anti-money-laundering system for one of Europes largest retail banks in just two days last quarter. And, it's also a powerful recruiting and retention tool. Someone else is enjoying the rewards. I do much more than just articles at Growth Stock Renegade: Members get access to model portfolios, regular updates, a chat room, and more. If history repeats itself, then PLTR stock could set up as a profitable trade. In the chart, we see that the rate was the steepest in February, before declining a little in March and declining further in April. Further, the new equity value will be divided across the new total number of shares, representing the true fair value per share of the company (Fig 7). Nevertheless, in 12 months, it's beaten some of the world's best companies. Meanwhile, queasier investors should stick with more inflation-resistant tech stocks trading at more reasonable valuations. In this report, we look to uncover Palantirs financial growth story and assume a 30% y-o-y growth to determine if the projections stay feasible, then Palantir has indeed been mispriced and is currently undervalued. For the past decade, we have developed and perfected technology designed to help private investors, just like you, find the best opportunities, with the greatest upside potential, in any financial climate., Invest Like a Pro with Unique Data & Simplifed Tools, Mohamed El-Erian Says the Stock Market Rally Could Be Short-Lived; Here Are 2 Strong Buy Dividend Stocks for Stable Cash Return, Boost Your Passive Income; 3 Stocks with 50+ Years of Dividend Growth. Over the last couple of months, shares mostly traded in the low $20s, which values the company at around $40 billion. Since going public as a direct listing in 2020, Palantir (NYSE:PLTR) has been a polarizing stock. For example, Palantir is helping the National Health Service (NHS) analyze information for millions of patients. Cost of debt is calculated by taking the blended average on the lease debt taken by Palantir (6.35%) and credit facilities (2.75%) and adding the 10-year risk free rate. Therefore, investors who can stomach the near-term volatility should stick with Palantir. The market's interest in the data mining firm was muted at first, but its stock skyrocketed to $45 per share during the Reddit-fueled rally in late January. (You are fully protected by Seeking Alpha's unconditional guarantee.). The big picture is that share count is a hot button issue. Best-of-breed growth stock ideas targeting oversized returns. Since then, it has fallen to trade at $18-$19 levels. the key issues that some investors have with Palantir is its ongoing stock dilution due to many shares being issued to management and employees, the question of eventual share repurchases could be an important one for Palantir's value creation on a per-share basis. Following which, we can identify that Palantir will be growing at a 32.9% CAGR from US$1.5B in FY21 to US$8.4B in FY27 (hitting the target of US$5B at FY25 too). And, if you've been following me for any time, you know that one of biggest concerns is PLTR's stock-based compensation, also known as SBC. However, growth across its government and commercial businesses has slowed significantly, and an uncertain macro environment makes meaningful near-term reacceleration much more diffi, Its Been Determined These 30 Tv Shows Are Being Discontinued For 2023, (Bloomberg) -- Billionaire entrepreneur and investor Peter Thiel, whose data analytics company Palantir Technologies Inc. is vying for a 480 million ($595 million) National Health Service data contract, has described British peoples affection for the state-backed health service as Stockholm syndrome. Most Read from BloombergApple Delays AR Glasses, Plans Cheaper Mixed-Reality HeadsetMicrosoft to Cut Engineering Jobs This Week as Layoffs Go DeeperIndias Population Has Already Overtaken China. An adjusted free cash flow (FCF) of $119 million in the last quarter and a margin of 30% is hard to ignore. Lets take a look at their Government and Commercial business. (Cognitive Computing) I noticed that their outstanding shares/market cap has been rapidly going up/diluting since. It is said that back in 2011, the U.S. Army had reportedly used Gotham to track down Osama Bin Laden. With the dilution effect accounted for (representing over US$3B in dilution across 246M shares), Palantirs true fair value per share will be priced at US$20.75 via EBITDA multiple method and US$20.18 via terminal growth method. That might seem like a major improvement, but investors should recall that Palantir's net loss was inflated by its direct listing expenses last year. Today, Palantir trades at $22, for a $42 billion market capitalization. Again, I'm almost certain you've heard of PayPal (PYPL), Salesforce (CRM) and Adobe (ADBE). Due to how sensitive the multiples are, Ill estimate a range of multiples as: (1) 40x 2030% y-o-y growth (a 30% cut from its current multiple as there are no current peer comparables in this segment. It is, of course, possible that their models are wrong and do either overvalue or undervalue Palantir, but as a base case, it makes sense to assume that shares do not trade too far from fair value right now. Palantirs share price has undergone loads of controversy in terms of the forecasted direction and the possibility of a huge potential upside. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. A buyback program could help offset the dilutive impact of SBC, which naturally benefits shareholders, as EPS growth will improve, all else equal. Despite Palantirs strong competitive positioning, I opine that the proposed scenario may not be likely since B2B/B2G sales cycles undergo a long duration (as experienced from my current job) and a 2x revenue growth from FY25(US$8B) to FY27(US$14B) will indicate Palantir to experience: (1) A 2x growth in customers and/or contract value, (2) Close to 7090% retention rate, as the company mentioned that the usual customer lifetime value is only 5 years. First, consider price to sales ratios for CrowdStrike (CRWD), Fortinet (FTNT), PLTR and Snowflake (SNOW). Palantir specializes in big data analytics. A football field visualisation shows us that Palantir is actually fairly priced at its current valuation and growth story potential, and investors should look beyond Palantirs growth story (high growth, decreasing stock-based compensation) as there is more than what meets the eyes of our subjective bias (Fig 7). Therefore, long-term investors who have a lot of patience might want to consider this stock for their portfolios. Palantir's stock is also down by 84% from its all-time One way to reduce the impact of SBC would be to lower issuance, i.e. Please note all regulatory considerations regarding the presentation of fees must be taken into account. Despite the long 2023 InvestorPlace Media, LLC. The information is not intended to be used as the basis of any investment decision by a person or entity. Is This an Income Stream Which Induces Fear? Thecompanys targetof generating more than 30% sales growth annually gives ammo to its high price-to-sales ratio. Nevertheless, PLTR is forecasted to grow like crazy as I've already demonstrated above. Over the past three months, Palantir's insiders sold 12.6 million shares while buying 11.8 million shares. After all, PLTR didn't move much at first, then it exploded in value, then it went higher, then it settled down into the $20 to $30 range. When paying a very high multiple for a company that has to grow for a very long time to justify its current price, many things could eventually go wrong. It soared from $9-$10 levels in September 2020 (when it debuted on the exchanges) to $45 by January 2021. First, it is seeing more traction with the defense industrial customer. Palantir had a share price of $30. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. In turn, banks will respond by strengthening their compliance programs. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. Please disable your ad-blocker and refresh. If you want to reach out, you can send a direct message here on Seeking Alpha, or an email to jonathandavidweber@gmail.com. The company works closely with the U.S. Army and the Department of Defense (DoD). I'll Avoid These Sectors In 2023 3:39AM ET 1/15/2023 Seeking Alpha. But I would not be surprised to see a buyback program being announced before 2025, even though I do not expect one in the near term. Fair Value is the appropriate price for the shares of a company, based on its earnings and growth rate also interpreted as when P/E Ratio = Growth Rate. I remain bullish. Leo Sun owns C3.ai, Inc. and Palantir Technologies Inc. Subscribe right now because you get 14 days for FREE. 18 of those deals were valued at $10 million or more. Down 65% in This Bear Market, Can Palantir Recover in 2023? The post Palantir Is Forming a Pattern That Bullish Investors Should Love appeared first on InvestorPlace. The Investment Community where "Cash Flow is King". And when you join, I'll instantly share my actively managed growth stock portfolio. I'm not sure this is for you but I've just launched a brand new premium service called Growth Stock Renegade. , Palantir recently made a large purchase of gold bars. Eng, Go to company page Enter your email to receive our newsletter. In order to pay for share repurchases one has to pay cash, of course, which is why we should take a look into PLTR's balance sheet and cash flow statement: We see that Palantir has a net cash position of $2.1 billion, not accounting for restricted cash. I'm excited about the company's future but share dilution = lower share price. Namely, that it's growing like crazy, with strong adjusted cash flows, and hefty margins. Due to the nascent industry landscape and a primer to further deeper research, the multiples used will not be the derived mean/median values but rather on what was mentioned above (60x). The U.S. Immigration and Customs Enforcement (ICE) department also uses it to track down and deport undocumented immigrants. Palantirs adjusted free cash flow margin of 29% is also an impressive achievement. Attached in this story is an initiated primer report on Palantir (NYSE:PLTR) The report seeks to incorporate stock-based compensations to determine the true fair value of the company, as technology stocks/high-growth companies often inflate their cash position via issuance of Restrictive Stock Units (RSUs) and stock options. As long as management grows the company faster than it dilutes shareholders, the stock will outperform the index. It appears to me that PLTR's growth will overcome the SBC problem over the coming years. Bears say its close association with the United States government, along with an executive compensation structure that has caused share dilution, make PLTR stock overvalued. I appreciate your feedback, comments and questions. Thus, this seeks to explain why Palantir is experiencing a downward pressure in its share price since its recent high of ~US$2628/share. Due to the fact that a high-growth company also has many The Covid-19 pandemic has illustrated the potential for Palantir software especially within the healthcare industry, signing a two-year, $31 million contract with NHS England and assisting the UK Vaccine Program in the ordering, distributing, and tracking of all vaccines through Foundry. I think it's useful to inspect the narratives. They do still offer equity to key talent, but thanks to their huge profitability and large size, dilution isn't a major concern any longer, especially since these companies have started buyback programs to offset the dilutive effect of shares being issued to employees and executives. Banks may justify the return on investment (ROI) based only on the speed of the installation. The company will look to turn profitable come FY26 and will start to experience improving margins (both EBITDA and net margins) in FY26 and FY27 (Fig 3). PLTR's unique software can create significant operational value for its customers, and ongoing global disruptions like the pandemic and war can help to catalyze adoption further. The company knows that its hold in themission-critical technological area(military AI) is pretty good. Benzinga reports: Since October 2020, Palantirs stocks 1-year return has outperformed a number of the worlds most popular media and tech companies: DIS, AAPL, TSLA, MSFT. I work together with Darren McCammon on his Marketplace Service Cash Flow Club. Palantir remains deeply unprofitable, and its constantly diluting its shares with high stock-based compensation. Article printed from InvestorPlace Media, https://investorplace.com/2021/11/palantir-might-be-worth-the-buy-for-patient-investors/. I wrote this article myself, and it expresses my own opinions. Intuitively, we don't like it, but it's hard to see at a glance. ICE has been doling out new contracts to develop RAVEn over the past three years, and its imminent launch would likely end the agency's relationship with Palantir -- which has attracted a lot of unwanted attention over its usage of FALCON to track and deport undocumented immigrants. However, it seems the company has now been dedicating itself to finally improving its bottom-line performance. Gross margins are stronger than the S&P 500 average. On the other hand, CRM increased share count rather substantially and didn't quite make it over 300% price appreciation. There's no dilution happening, they aren't issuing new shares. So been balls deep in Palantir since it went public in September. Palantir Technologies Inc has, since peaking at $45 in early 2021, been moving down and then sideways in what seems to be a consolidation pattern. Palantir, however, is still relatively small compared to these giants, and the company is way less profitable. This information is provided for illustrative purposes only. That balance between sellers and buyers isn't too jarring, but Palantir's stock has also lost about a third of its value over the past three months, and is trading near its 52-week low. Insider sales are hurting shareholders. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. I am not receiving compensation for it (other than from Seeking Alpha). In fact, based on the companys FCF projections, InvestorPlace contributor Mark Hake has a price target of $38.81 for Palantir. No cash balance or cash flow is included in the calculation. In FY2020, its revenue grew 47%. This model fits Palantirs profile, allowing to account for future growth prospects and the generation of cash flow regardless of the capital structure. I am not receiving compensation for it (other than from Seeking Alpha). Since October 2020, Palantirs stocks 1-year return has outperformed a number of the worlds most popular media and tech companies: DIS, AAPL, TSLA, In the quarter, Palantir added 34 new customers and closed 54 deals worth $1 million or more. Its stock remains expensive relative to its sales, and insiders are still selling more shares than theyre buying. Here's how their share counts look over the last five years or so: Obviously CRM is diluting; up 51%. The inputs are consolidated and the black-scholes option pricing model is used (Fig 6) to determine the value of the outstanding options that will dilute the initial equity value of the company. In the last quarter, Palantir reported a 37% year-over-year (YOY) increase in commercial revenue. Nasdaq The companys valuation could thus be well above $20 billion if public investors are willing to buy the shares where theyve traded most recently in the private market. Palantir is pursuing a direct listing rather than a traditional IPO, meaning its not raising capital and is instead allowing existing stakeholders to sell shares to new investors. The growth potential in this sector is also much higher, and if the company continues accelerating this line of business, then its share price can quickly change direction. Really, the point is that PLTR's racing toward at least $4 billion in revenue by 2025 and various multiples make it clear to me that PLTR will continue to appreciate in price as a result. Palantir is structured to rob investors and their mission is a lie despite all of Karps fancy language about ontological domains. Share dilution from 244 million at IPO to 1.6 billion. Bears say its close association with the United States government, along with an executive compensation structure that has caused share dilution, make PLTR stock overvalued.
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