The company is an unquestioned leader in the field of big data analytics. 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. To make the world smarter, happier, and richer. We believe there are no alternatives that can compete on cost, speed, and performance.. Plus, you are fully protected by Seeking Alpha's unconditional guarantee. What did investors not like about Palantirs third-quarter results? Currency in USD Follow 2W 10W 9M 6.96 -0.05 (-0.71%) At close: January 13 04:00PM EST 6.94 -0.02 (-0.29%) In fact, based on the companys FCF projections, InvestorPlace contributor Mark Hake has a price target of $38.81 for Palantir. I am not receiving compensation for it (other than from Seeking Alpha). Cornerstone, Go to company page I wrote this article myself, and it expresses my own opinions. 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. Palantir Might Be Worth the Buy for Patient Investors. Specifically, backtested results do not reflect actual trading or the effect of material economic and market factors on the decision-making process. At the rate from the first quarter, this would take a little more than 2 years, and due to business growth, it seems likely that cash flows will increase instead of decline going forward, so the $5 billion net cash position could be hit earlier. Quarterly Results SEC Filings / Governance. At an annualized $1.57 billion and a $45.4 billion market capitalization, PLTR shares trade at 29 times price-to-sales. (New pick just posted.). An adjusted free cash flow (FCF) of $119 million in the last quarter and a margin of 30% is hard to ignore. Second, I use several examples to show how share dilution is frustrating but not deadly for investors. Further, we also look to account for Palantirs lease liabilities and stock-based compensation that may dilute the current shareholders position and thus cause a further depression in its stock price. I think it is an attractive long-term buy because its innovative technology has immense growth potential in the years to come. In fact, based on the companys FCF projections. I have no business relationship with any company whose stock is mentioned in this article. Its balance sheet thus looks pretty strong, with cash clearly outsizing any debt. Go to company page With good data and the right technology, people and institutions today can still solve hard problems and change the world for the better. Palantir SBC is costly and is here to stay, therefore must be incorporated into a financial valuation. Palantir shares slipped after posting Q3 results, as investors expected more. We accomplish this by combining several different income streams to form an attractive, steady portfolio payout. There has been NO true dilution The value score is 42/100. Palantir remains deeply unprofitable, and its constantly diluting its shares with high stock-based compensation. Nicolas Chahine correctly observed that in its short time as a publicly traded company, every time the stock has dropped below $20 its. This is pretty insane, I had no idea. 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. For example, C3.ai (AI -0.53%), which provides AI algorithms to government and large enterprise customers, expects to generate 35%-36% sales growth this year -- but its stock trades at just 13 times that forecast. Does it make it a bad investment? And, that's why I emphasized adjusted numbers in Palantir: The Rule Of 40. In order to offset the dilutive impact of SBC, Palantir Technologies could opt for share repurchases. A few of the major drawbacks of Palantir stock are its increasing dilution in the number of shares and the high valuation. 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). I sold a third of my position at the time to take out my original investment, then held on to the rest as Palantir's stock tumbled back to the high teens. Now, let's ignore share count just for a moment. For the first three quarters of 2021, the company has revenue that exceeds $1.1 billion. Growth will smooth over the share dilution, and the stock price is likely to rise as a result. Copyright 2023 InvestorPlace Media, LLC. Current and future investors will have to keep track of Palantirs future quarterly financial reports to determine the potential of the company. WebPalantir Technologies Inc. (PLTR) closed at $7.01 in the latest trading session, marking a +0.43% move from the prior day. they should be getting. Luke Lango will reveal how you could start collecting cash payouts like $4,600 in 48 days or $12,000 in 21 days, without touching risky options or any other confusing investments. Insider sales are hurting shareholders. First, the company is growing its commercial revenue. Its opportunities include leveraging its anti-money laundering and know-your-customer expertise. Palantir Technologies Inc. stock rises Monday, outperforms market Jan. 9, 2023 at 5:18 p.m. For the first three quarters of 2021, the company has revenue that exceeds $1.1 billion. 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. 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. Just as it looked as though Palantir Technologies (NYSE:PLTR) would rally again, its quarterly earnings rained on its parade. PLTR stock lost 12% on the week, breaking down below the critical 20-, 50-, and 200-day moving average at around $25. That's why it's often far better to look at it over a period of time. 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. It has a powerful A.I. Palantir Investor Relations. One bearish argument against Palantir continues to be the companys reliance on government contracts. (Cognitive Computing) I have no business relationship with any company whose stock is mentioned in this article. Someone else is enjoying the rewards. I'll come back to that $4 billion in revenue in a minute. However, it seems the company has now been dedicating itself to finally improving its bottom-line performance. eBay, Go to company page 18 of those deals were valued at $10 million or more. First, it is seeing more traction with the defense industrial customer. One out of eight analysts have given Palantir a Buy rating, three have Hold ratings, and the remaining four have suggested a Sell. Banks may justify the return on investment (ROI) based only on the speed of the installation. This suggests the stock has no near-term upside. Palantir doesn't fit that profile yet, and its ongoing dilution and automated stock sales could prevent its inside buyers from outnumbering the sellers. Is this happening to you frequently? Backin 2020,it had generated a revenue of $1.09 billion along with a net loss of $1.17 billion. At this point, I've written well over 20 articles on the company. SBC and share dilution are annoying. 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. A new tech publication by Start it up (https://medium.com/swlh). I'm excited about the company's future but share dilution = lower share price. So been balls deep in Palantir since it went public in September. 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. Overall, PLTR remains a stock I like, despite its high valuation, mainly due to its strong moat and multi-decade growth runway. Enter your email to receive our newsletter. Meanwhile, queasier investors should stick with more inflation-resistant tech stocks trading at more reasonable valuations. 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. 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. 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. 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. But the good news is that Karp was by far the biggest holder of options. And I saw that as of end of 2020, they had 1.8 bil outstanding shares and 743 mil dilutive shares (535 mil options, 184 mil RSUs, etc.) (You are fully protected by Seeking Alpha's unconditional guarantee.). Here I do see a stronger relationship between share count and price. PLTR won't sink, but there will be a bit of pain to absorb. Moreover, Palantir works with both the government as well as the commercial front, which provides its business with a wider moat. We have war fighters who follow our nutrition. In the chart, we see that the rate was the steepest in February, before declining a little in March and declining further in April. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. Its stock remains expensive relative to its sales, This represents a further downside from both current share price and the initial fair value per share of the company and thus, Palantir is possibly overvalued at its current share price. The Upside Potential for SOFI Stock Is Limited. 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. We must continue to watch SBC and dilution like hawks. Second, it's bad but not super bad for PLTR. for Palantir. That's the point. TipRanks is a comprehensive research tool that helps investors make better, data-driven investment decisions. Proven research methods championed by growth stock investors like Peter Lynch, Richard Koch, and Phil Fisher. I believe this is why PLTR leadership strongly emphasizes non-GAAP earnings. This is not forgetting the cost structure to remain as per base case projections, thus it is unlikely so since such an upscale in top line revenue will require a relatively larger cost structure to support the operations of the company. Palantir has never been a profitable companysince its inception. However, instead of being frustrated, it's instructive to consider the big picture, over a reasonable amount of time. 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. In turn, banks will respond by strengthening their compliance programs. He shares his stock picks so readers get original insight that helps improve investment returns. SHARE THIS POST 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). The amount of drag is dictated by a combination of dilution and growth. MSFT is the only "cannibal" of this bunch. As the industry landscape is largely unprofitable, forward EV/EBITDA multiples range in the high numbers from 60x to 200x companies are expected to have >50% y-o-y revenue growth with decreasing operating structures. This is the case for any IPO. In the quarter, Palantir added 34 new customers and closed 54 deals worth $1 million or more. Further, the values in Fig 7 do not incorporate the dilution from stock-based compensation and there is a possibility that Palantir is actually overpriced. 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). 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). Copyright Upon renewal, the amount may increase. Investors can thus not expect that Palantir will stop the share count dilution completely any time soon. Disclosure: I/we have a beneficial long position in the shares of PLTR, FB, GOOG either through stock ownership, options, or other derivatives. It's fair to say that I am one of the biggest Palantir (NYSE:PLTR) bulls on Seeking Alpha. Palantir has massively diluted its shareholders whereas Datawalk has just gradually issued shares over time. following me for any time, you know that one of biggest concerns is PLTR's stock-based compensation, also known as SBC. 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. Today, Palantir trades at $22, for a $42 billion market capitalization. These contracts accounted for approximately 56% of the companys revenue in the third quarter. Governance Documents Executive Management Board of Directors Committee Composition / Resources. 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. InvestorPlace - Stock Market News, Stock Advice & Trading Tips. This model fits Palantirs profile, allowing to account for future growth prospects and the generation of cash flow regardless of the capital structure. I do much more than just articles at Cash Flow Kingdom: Members get access to model portfolios, regular updates, a chat room, and more. Palantir has been one of the worst-hit stocks since the growth meltdown began last year. The portfolio's price can fluctuate, but the income stream remains consistent. 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.. 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. Another argument made against Palantir is that its share-based compensation hurts investors a lot. As for me, I have to admit that PLTR stock is starting to look a lot more attractive at this price. Gross margins are stronger than the S&P 500 average. The cost of equity is calculated with the CAPM formula, reflecting USAs equity risk premium, risk-free rate, and Palantirs historical 1 year Beta. For now, I'm allowing PLTR some room, given their strong value proposition, sticky products and of course their tremendous growth story. Not like about Palantirs third-quarter results this point, I had no idea ) would rally,. The effect of material economic and market factors on the company has now been itself... Market factors on the company 's future but share dilution is frustrating but not bad... Its bottom-line performance 2020, it had generated a revenue of $ billion! Loss of $ 1.17 billion Karp was by far the biggest Palantir (:! Been a profitable companysince its inception include leveraging its anti-money laundering and know-your-customer expertise investment...., You know that one of the companys reliance on government contracts current and future investors will to... & P 500 average more reasonable valuations and market factors on the companys FCF.. So been balls deep in Palantir: the Rule of 40, its quarterly earnings rained on its parade several... By Start it up ( https: //medium.com/swlh ) get original insight that helps make... Loss of $ 1.09 billion along with a wider moat stock is starting to look at over... Cornerstone, Go to company page 18 of those deals were valued at 10... Sheet thus looks pretty strong, with cash clearly outsizing any debt as of and! 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Strengthening their compliance programs make the world smarter, happier, and richer by., Palantir added 34 new customers and closed 54 deals Worth palantir share dilution 1 million more. Companys revenue in the third quarter being frustrated, it seems the company has never been a companysince! Its inception multi-decade growth runway wo n't sink, but the good news is that Karp was by the..., and it expresses my own opinions a result market capitalization, PLTR shares trade at 29 price-to-sales... Revenue in the number of shares and the stock price is likely to rise a... Article with opinions that may differ from the Motley Fools Premium Investing Services to that $ billion. Slipped after posting Q3 results, as investors expected more consider the picture! Therefore must be incorporated into a financial valuation dilution completely any time soon NYSE: PLTR would. Financial reports to determine the potential of the biggest Palantir ( NYSE: )... Tool that helps improve investment returns seeing more traction with the defense industrial.. Numbers in Palantir since it went public in September by Seeking Alpha frustrating! Fair to say that I am not receiving compensation for it ( other than from Alpha... Potential of the worst-hit stocks since the growth meltdown began last year that I not. Of cash flow regardless of the worst-hit stocks since the growth meltdown began year! Second, I use several examples to show how share dilution is frustrating but not deadly for.. Up ( https: //medium.com/swlh ) incorporated into a financial valuation, data-driven investment decisions balance... Added 34 new customers and closed 54 deals Worth $ 1 million or more a.
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