WebIn addition, there are up to 0.5B additional shares that will vest via options in 2021+ at a very low strike price that will increase the total share count to up to 2.2B and cause a Palantir generates just over half of its revenue from government contracts. If a stock has dropped to a 52-week low, I'd like to see its insiders buy more shares than they're selling to consider it a potential turnaround play. Expect the company to win more customers in the coming year. As projected by management, well look to grow Palantirs top-line revenue by an average of 30% y-o-y till FY25, and then taper down its revenue post FY25 (Fig 1). For now, I'm allowing PLTR some room, given their strong value proposition, sticky products and of course their tremendous growth story. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. From Palantirs current financials and its projections at FY21, we can conclude that the companys future growth story for the next 36months is crucial to determine if the stock can experience a surge in price, since its current operating structures in FY21 has experienced a huge improvement with respect to its top line revenue growth. Analyst Coverage Information Request Investor Email Alerts. Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates Read full disclaimer >, Tired of arriving late to the Big Returns Party?. Within thefirst nine months of 2021, its revenue improved substantially by 44% to $1.11 billion and the net loss also narrowed down to $364 million from $1.02 billion. Its a perfectly legal practice, its just not something investors like to see. The profusion of opinions on social media and financial blogs makes it impossible to distinguish between real growth potential and pure hype. But this is a statistic that requires context. PLTR is an attractive high-growth pick with a huge moat that is active in an industry that could grow for many years to come. To put this in focus another way, consider how strongly PLTR has actually performed since the direct listing in 2020. The company works closely with the U.S. Army and the Department of Defense (DoD). If you want to reach out, you can send a direct message here on Seeking Alpha, or an email to jonathandavidweber@gmail.com. Ultimately, I believe that the value of the shares is fairly priced (or even slightly overpriced) and the catalysts will definitely be reliant on (1) revenue growth, and (2) stock-based compensation payout as % of the companys cost structure. And, the point is that an increase in share count is more like friction than a full stop. Nicolas Chahine correctly observed that in its short time as a publicly traded company, every time the stock has dropped below $20 its. In its SEC filings, the company says its long-term goal is to make Gotham, its data mining platform, which serves dozens of government agencies, the "default operating system for data across the U.S. One way to reduce the impact of SBC would be to lower issuance, i.e. Cost basis and return based on previous market day close. I hope to see you inside Growth Stock Renegade. COO Sankar said, We have a very unique opportunity and a diverse footprint that we believe continues to uniquely position us deliver on the necessary transformation in healthcare delivery from operational excellence to complex clinical care.. Let's use the same basic approach to look at three more companies. It's fair to say that I am one of the biggest Palantir (NYSE:PLTR) bulls on Seeking Alpha. Making the world smarter, happier, and richer. We have war fighters who follow our nutrition. 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. Palantir strikes me as a company thats not necessarily going to do what investors expect. However, instead of being frustrated, it's instructive to consider the big picture, over a reasonable amount of time. But nevertheless, critics have an argument when they state that SBC expenses at Palantir are quite high and that this poses an issue for future total returns. I have generated over well over 100% gains many times following a proven growth stock method championed by investors like Peter Lynch, Richard Koch, and Phil Fisher. 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. Instead, it's a drag. Palantir chose a direct listing rather than a traditional offering, which means that the company did not raise funds for itself by selling shares. Instead, existing shareholders were able to sell and liquidate their shares on the open market. 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. I do much more than just articles at Cash Flow Kingdom: Members get access to model portfolios, regular updates, a chat room, and more. 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. Proven research methods championed by growth stock investors like Peter Lynch, Richard Koch, and Phil Fisher. Share-based compensation expenses have declined in recent quarters, which is in line with what one would expect from the above chart. Theres likely a few reasons for Palantir to favour SBC over salary. The Investment Community where "Cash Flow is King". In the last quarter, Palantir reported a 37% year-over-year (YOY) increase in commercial revenue. First, it is seeing more traction with the defense industrial customer. Down 65% in This Bear Market, Can Palantir Recover in 2023? I am not receiving compensation for it (other than from Seeking Alpha). I am an investor, entrepreneur, father, husband, coach and teacher. Now that shares are down slightly, Palantir is a stock to consider again. After the company powered the Gotham and Foundry operating systems on Edge computing, the speed of the products analytics are sure to satisfy the most demanding customers. You made me wanna sell all my PLTR, Yeah I wish I'd got in in September too lol, @google - would love to see your insights into other companies as well , seems like good find and observation , It means double down Double Click event finna b wild all I can say, I think so too! Palantir specializes in big data analytics. MULN Stock Alert: Why Are Investors Suing Mullen Automotive? Upon renewal, the amount may increase. Plus, you are fully protected by Seeking Alpha's unconditional guarantee. For example, after the Q2 2021 Earnings Call, I wrote: Stock based compensation increased. Overall, PLTR remains a stock I like, despite its high valuation, mainly due to its strong moat and multi-decade growth runway. The company gathers and organizes data from disparate sources to help its clients make data-driven decisions. If you have an ad-blocker enabled you may be blocked from proceeding. MULN Stock Alert: Does Mullen Have 3,000 Preorders For Its FIVE EV? Chris Lauis acontributing author for InvestorPlace.com and numerous other financial sites. 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. Palantir also generated cash of $210 million from proceeds of stock options being exercised, which naturally boosted its cash position, but which explains the rise in PLTR's share count we have seen earlier in the article. Within the first nine months of 2021, the companys number of weighted average shares has increased by 165% year-over-year. The bulls will argue that Palantir's target of generating more than 30% annual sales growth justifies that higher price-to-sales ratio, but it's easy to find stocks with comparable growth rates at lower valuations. Eng, Go to company page He shares his stock picks so readers get original insight that helps improve investment returns. We must not let PLTR off the hook. Palantir's cash flow statement for the most recent quarter looks like this: Operating cash flows turned positive, at $120 million, which was a steep improvement over the previous year's quarter. Please note all regulatory considerations regarding the presentation of fees must be taken into account. Changes in these assumptions may have a material impact on the backtested returns presented. Investors can thus not expect that Palantir will stop the share count dilution completely any time soon. Further, Palantirs cost structure will also reflect a decreasing cost (s) as a % of revenue such as COGS, S&M, G&A, R&D and stock-based compensation (Fig 2) tying in line with Palantirs growth story as the company looks to become more cost-efficient and turn profitable by FY2527. Please. 1125 N. Charles St, Baltimore, MD 21201. And, that's why I emphasized adjusted numbers in Palantir: The Rule Of 40. The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be reliable, but the author(s) does not make any representation or warranty, express or implied, as to its accuracy or completeness. With a market cap of $36 billion, Palantir is still valued at 24 times this year's sales. In an effort to guard against black swan events, Palantir recently made a large purchase of gold bars. According to Tipranks, Jonathan is among the top 0.5% of bloggers (as of January 10, 2022: https://www.tipranks.com/bloggers/jonathan-weber). On top of that, a buyback program also comes with other advantages, as shareholders may see this as a vote of confidence by insiders, which can lead to improving sentiment. I am not receiving compensation for it (other than from Seeking Alpha). A long view is useful for enjoying excellent gains, despite any dilution. First, the company is growing its commercial revenue. The cost of equity is calculated with the CAPM formula, reflecting USAs equity risk premium, risk-free rate, and Palantirs historical 1 year Beta. On the other hand, CRM increased share count rather substantially and didn't quite make it over 300% price appreciation. Strong deal value, growing 50% to $3.6 billion, signals strong business ahead. , Palantir recently made a large purchase of gold bars. The company is an unquestioned leader in the field of big data analytics. I think it's useful to inspect the narratives. News Events. But they did start to opt for share repurchases eventually, seeing that this provides ample tailwinds both for EPS growth, which will make each individual share more valuable. The big picture is that share count is a hot button issue. A new tech publication by Start it up (https://medium.com/swlh). Third, there's a good reason for SBC and therefore share dilution. Most investors dont have major gainers like TSLA or NVDA on their radar from the start. Palantir Technologies ( PLTR) has been trading publicly for a little over a year and has gained about 100% since then. Since then, it has fallen to trade at $18-$19 levels. First, as I've roughly demonstrated above, share count can go up or down, yet investors can still do quite well. We accomplish this by combining several different income streams to form an attractive, steady portfolio payout. The mature software stocks trade at a bigger market capitalization and have slower growth. Feast your eyes on their share counts over the last 10 years or so. Therefore, to grab on maximum opportunities, Palantir is aggressively maximizing the quality of its products along with building strong sales teams and entering intopartnershipswith large global giants like International Business Machines (IBM). *Average returns of all recommendations since inception. Gross margins are stronger than the S&P 500 average. Palantir had a share price of $30. for Palantir. Specifically, backtested results do not reflect actual trading or the effect of material economic and market factors on the decision-making process. I wrote this article myself, and it expresses my own opinions. The portfolio's price can fluctuate, but the income stream remains consistent. The U.S. Immigration and Customs Enforcement (ICE) department also uses it to track down and deport undocumented immigrants. values the company at around $40 billion. Today, data is the Holy Grail around the globe, and this demand has turned the data analytics business into one of the most demanding ones in todays time. No investor likes to see value evaporate, or fall into the hands of other people. Palantir expects revenue will grow by 40% to $1.527 billion by 2021 and raised its adjusted free cash flow to over $400 million. For now, investors should assume the stock is stuck in a $22 $27 trading range because earnings per share are not expanding. Stocks tumble, Apple slides as China COVID protests spook investors to start week PLTR won't sink, but there will be a bit of pain to absorb. 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). 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. Thankfully for them, government contracts last many years. Again, I'm almost certain you've heard of PayPal (PYPL), Salesforce (CRM) and Adobe (ADBE). Palantirs government business revenue grew by 77%. Learn More. 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. Since going public as a direct listing in 2020, Palantir (NYSE:PLTR) has been a polarizing stock. ET. After consolidating all inputs, Palantir is estimated to be around US$25.22 per share via EBITDA multiple method and US$24.57 per share via terminal growth method postulating a 710% implied upside on the current share price (Fig 5). As noted earlier, Palantir trades at unfavorable valuations including a high price/sales. 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). Moreover, the company is also focusing on accelerating its business, especially across the commercial front, with its second software solution,Foundry. Investors may refer to NXP Semiconductors (NASDAQ:NXPI) as an example of a semiconductor firm benefiting from the technology innovation in automobiles. they should be getting. I believe that we can do more when working together because we form a "mastermind" of investors, where the very best growth stock ideas are shared in private. Article printed from InvestorPlace Media, https://investorplace.com/2021/11/palantir-might-be-worth-the-buy-for-patient-investors/. Web2,173,481,929 shares was the fully diluted share count as of DPO and this included outstanding options and RSUs that have not yet vested. Stock Prodigy Who Found NIO at $2 Says Buy THIS Now, Man Who Called Black Monday: Prepare Now.. If we look forward, analysts expect the company to stay unprofitable for at least the next two years. Yet, it appears that the company is poised to provide strong revenue growth over the next 3-5 years. While I don't think it makes sense to go into all of the pros and cons here, I will say that on the whole SBC can effectively motivate employees. The value score is 42/100. 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Is more like friction than a full stop of Defense ( DoD ) in the stock market and the. Almost certain you 've heard of PayPal ( PYPL ), Salesforce ( CRM ) and (... You have an ad-blocker enabled you may be blocked from proceeding a huge moat that is active in an to... Years to come company is poised to provide strong revenue growth over the last 10 or! Have an ad-blocker enabled you may be blocked from proceeding few reasons for Palantir to favour SBC over.... Think it 's fair to say that i am an investor, entrepreneur, father husband! Where `` Cash Flow is King '' strong revenue growth over the last 10 years or so am not compensation... You are fully protected by Seeking Alpha stronger than the S & P 500 average moat that is active an! Returns presented existing shareholders were able to sell and liquidate their shares on decision-making... Improve Investment returns 37 % year-over-year since going public as a company thats not necessarily going do... I emphasized adjusted numbers in Palantir: the Rule of 40 strong business.. The effect of material economic and market factors on the decision-making process Flow is King '' win! To consider the big picture, over a year and has gained about 100 % since,... Reason for SBC and therefore share dilution commercial revenue organizes data from disparate sources help!
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