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. Upon renewal, the amount may increase. 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. All rights reserved. Without incorporating the effects of dilution, any fair value automatically becomes inaccurate aka useless- and we risk thinking that a $81 fair value per share for Palantir would be reasonable. Palantir generated $1.09 billion in revenue in 2020, but it posted a whopping net loss of $1.17 billion. 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. Expect the company to win more customers in the coming year. ET by MarketWatch Automation Venture Capital Unicorns Grew by Leaps and Bounds. Of particular concern was the approximately 17.2 million options that were still being held by Palantir CEO Alex Karp as of Sept. 30. Price as of January 18, 2023, 1:25 p.m. First, the company is growing its commercial revenue. I'm excited about the company's future but share dilution = lower share price. Existing shareholders get diluted, while the execution of stock options, and the selling of awarded shares, can also pressure PLTR's share price from a supply-demand perspective. And when you join, I'll instantly share my actively managed growth stock portfolio. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. In the quarter, Palantir added 34 new customers and closed 54 deals worth $1 million or more. Last but not least, the share price gets influenced positively thanks to the impact on the supply-demand situation of shares on the market. Interestingly, share count isn't a concept that is instantly easy to see. Please. Analyst Coverage Information Request Investor Email Alerts. So today, I'll take a look at five red flags that might limit Palantir's near-term gains. Backtested results are adjusted to reflect the reinvestment of dividends and other income and, except where otherwise indicated, are presented gross-of fees and do not include the effect of backtested transaction costs, management fees, performance fees or expenses, if applicable. Despite the long tail in revenue in the next few years increasing earnings, the dilution will limit the stocks upside. Changes in these assumptions may have a material impact on the backtested returns presented. But over the long term, I still expect Palantir to leverage its battle-hardened reputation to secure more government clients and expand its enterprise business. 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. Social Security: 4 Big Changes Washington Wants to Make, Warren Buffett Is Raking in $4.84 Billion in Annual Dividend Income From These 6 Stocks, 3 Reasons Tesla Stock Is a No-Brainer Buy in 2023, 3 High-Growth Stocks That Could Be Worth $1 Trillion in 10 Years -- or Sooner, Join Nearly 1 Million Premium Members And Get More In-Depth Stock Guidance and Research, Motley Fool Issues Rare All In Buy Alert, Copyright, Trademark and Patent Information. The company is an unquestioned leader in the field of big data analytics. Overall, PLTR remains a stock I like, despite its high valuation, mainly due to its strong moat and multi-decade growth runway. Palantir remains deeply unprofitable, and its constantly diluting its shares with high stock-based compensation. Under these conditions, I think PLTR can be a buy at current prices, but shares are not a great choice for everyone. Strong deal value, growing 50% to $3.6 billion, signals strong business ahead. Palantir announced its financial results for FY21 Q3 including the following: (1) 34 net new customers in Q3, closing 54 deals of >US$1M, 33 deals of >US$5M, and 18 deals of >US$10M, (2) Total revenue growth of 36% y-o-y to US$392M for FY21 Q3, (3) Positive free cash flow of US$119M, representing a 30% margin. This is AMC / GameStop levels of dilution. 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 Right now is the perfect time to subscribe because it's affordable for any budget. I have no business relationship with any company whose stock is mentioned in this article. The company is an unquestioned leader in the field of big data analytics. If you want to reach out, you can send a direct message here on Seeking Alpha, or an email to jonathandavidweber@gmail.com. Due to the fact that a high-growth company also has many This is somewhat difficult for some investors to remember. PLTR stock lost 12% on the week, breaking down below the critical 20-, 50-, and 200-day moving average at around $25. First, as I've roughly demonstrated above, share count can go up or down, yet investors can still do quite well. Here's how their share counts look over the last five years or so: Obviously CRM is diluting; up 51%. Virtually every chart has this phrase in the footnotes: "excludes stock-based compensation and related employer payroll taxes." 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. The averagePalantir Technologies price targetof $23.14 implies 25.4% upside potential. 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. Furthermore, significant share dilution has passed and should not be a problem as the company advances. Intuitively, we don't like it, but it's hard to see at a glance. Third, I show how strong growth can adequately compensate for share dilution, at least over longer periods of time; patience is required. government.". First, it is seeing more traction with the defense industrial customer. That being said, I think it's still important for bullish investors to recognize Palantir's weaknesses. Is this happening to you frequently? He shares his stock picks so readers get original insight that helps improve investment returns. 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. Thanks for pointing this out. MULN Stock Alert: Why Are Investors Suing Mullen Automotive? 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. Warren Buffett spoke to this idea more than 25 years ago: When companies with outstanding businesses and comfortable financial positions find their shares selling far below intrinsic value in the marketplace, no alternative action can benefit shareholders as surely as repurchases. This model fits Palantirs profile, allowing to account for future growth prospects and the generation of cash flow regardless of the capital structure. exercisable in time.That's 41% additional share dilution with time and I can already tell this is pretty fucking ridiculous. Palantir, as a high-growth tech company, has to compete for talent and wants to reward its employees and managers when they do generate strong results. That's why it's often far better to look at it over a period of time. Does it make it a bad investment? There is, however, also another possibility. Subscribe to Yahoo Finance Plus to view Fair Value for PLTR, Mizuho analyst Matthew Broome initiated coverage on Palantir Technologies Inc (NYSE: PLTR) with a Neutral rating and a price target of $7. After consolidating all inputs, Palantir is estimated to be around US$25.22 per share via EBITDA multiple method and US$24.57 per share via terminal growth method postulating a 710% implied upside on the current share price (Fig 5). 5 Hypergrowth Stocks With 10X Potential in 2023. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. It should also benefit from the growing need for real-time data, and remain a top play on the expanding AI market. And, the point is that an increase in share count is more like friction than a full stop. Its balance sheet thus looks pretty strong, with cash clearly outsizing any debt. However, the stock market did not seem to reciprocate such good news and instead, Palantir has dropped ~15% from US$ 26.75 to US$22.83 as of 15th Nov 2021. 1125 N. Charles St, Baltimore, MD 21201. So been balls deep in Palantir since it went public in September. Nicolas Chahine correctly observed that in its short time as a publicly traded company, every time the stock has dropped below $20 its presented investors with a buying opportunity. At 150x forward earnings, and at around 30x net revenues, PLTR is far from a cheap stock. Its stock remains expensive relative to its sales, Nevertheless, PLTR is forecasted to grow like crazy as I've already demonstrated above. Join today for less than $2 per day. 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. The only thing that will happen is that is that insiders (employees and private equity investors) will be able to sell their shares once the lock up ends. WebTo give you an idea of how many shares were covered under the 2010 Plan, this is from the S-1 (emphasis mine): As of June 30, 2020, options to purchase 308,905,744 shares of (New pick just posted.). 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. Uber, Lucky you got in in September. Hence, projecting such valuations does not seem realistic and the base cases outcome is recommended. If we assume PLTR can maintain a P/S of 30 then it roughly implies to me that PLTR will reach $120 billion in market capitalization. First, I explain how stock-based compensation or "SBC" is my #1 complaint about Palantir. At that point, PLTR would, I believe, have ample financial firepower relative to the company's size, which could allow management to pursue buybacks at a meaningful pace -- $5 billion would be north of 10% of the current market capitalization. for Palantir. At an annualized $1.57 billion and a $45.4 billion market capitalization, PLTR shares trade at 29 times price-to-sales. 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 post Palantir Is Forming a Pattern That Bullish Investors Should Love appeared first on InvestorPlace. To make the world smarter, happier, and richer. Palantir's stock is also down by 84% from its all-time Investors may refer to NXP Semiconductors (NASDAQ:NXPI) as an example of a semiconductor firm benefiting from the technology innovation in automobiles. Let's use the same basic approach to look at three more companies. On the other hand, CRM increased share count rather substantially and didn't quite make it over 300% price appreciation. Down 65% in This Bear Market, Can Palantir Recover in 2023? There are thus many reasons to like the company, but it should be noted that the company's shares are already pricing in a lot of future growth. I'm still bullish on Palantir's future, and I believe it can easily achieve its goal of generating at least 30% annual revenue growth from 2021 to 2025. 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 The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. And, as long as growth is far greater than dilution, everything should work out fine. I do much more than just articles at Cash Flow Kingdom: Members get access to model portfolios, regular updates, a chat room, and more. 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. Share based compensation where investors pay the employees no the company. That growth, combined with strong margins and cash flow, ought to translate to share price gains despite the friction and grind. Perhaps it would be easier for investors to accept Palantirs dabbling in gold and bitcoin if it wasnt for the continuing dilution of shares that is happening as management exercises warrants. But earlier this year, a leaked government document revealed that Immigration and Customs Enforcement (ICE) wanted to replace FALCON, the agency's customized version of Gotham, with a new in-house platform called RAVEn. First, the company is growing its commercial revenue. I'll come back to that $4 billion in revenue in a minute. If that holds true for 2021, that puts it at approximately $473 million for the year and $174 million in the most recent quarter. I looked up other tech stocks' sec filings (SQ, FB, GOOG, etc.) Perhaps I'm wrong here but to my eyes there's not an obvious correlation between share count and capital gains over 10 years. 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! Financial Market Data powered by FinancialContent Services, Inc. All rights reserved. Palantir's number of weighted-average shares rose 70% year over year at the end of 2020 following its direct listing. I'm not sure this is for you but I've just launched a brand new premium service called Growth Stock Renegade. I wrote this article myself, and it expresses my own opinions. Within the first nine months of 2021, the companys number of weighted average shares has increased by 165% year-over-year. No investor likes to see value evaporate, or fall into the hands of other people. But its hard to find fault when the company is growing both sides of the business. I/we have a beneficial long position in the shares of PLTR, PYPL, AMZN, GOOGL, CRWD, DIS, AAPL either through stock ownership, options, or other derivatives. One way to reduce the impact of SBC would be to lower issuance, i.e. Here's some color: The company appears to favour SBC over salary for all its employees, and thanks to the direct listing in 2020, the stock-based compensation expense increased five-fold from $241m in 2019 to $1.2bn in 2020. Buyer Beware! Its a perfectly legal practice, its just not something investors like to see. Down 67% in 2022, Is Palantir Stock a Buy for 2023? 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. However, we should not ignore the huge potential of the company in terms of providing solutions to unanswered problems across different industry segments. 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%) Instead, it's a drag. Nicolas Chahine correctly observed that in its short time as a publicly traded company, every time the stock has dropped below $20 its. Copyright The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. This attractive combination of both fronts also has the possibility to turn Palantir into one of the largest and most important companies in the future to come, thereby enabling the investors to earn multi-bagger gains. I know usual share dilution doesn't affect the company's fundamentals/story, but this seems way too extreme for shareholders to ignore. It is said that back in 2011, the U.S. Army had reportedly used Gotham to track down Osama Bin Laden. Even better, when you join you get instant access to my model portfolio targeting 100% returns in less than 36 months. Estimated return represents the projected annual return you might expect after purchasing shares in the company and holding them over the default time horizon of 5 years, based on the EPS growth rate that we have projected. its strong growth and its great position in its industry. Insider sales are hurting shareholders. However, I need to point out a few things. 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%. 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). The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com, Palantir Is Forming a Pattern That Bullish Investors Should Love, VW US CEO: Customer reaction to ID.4 EV 'has been incredible,' with 20K on backorder, Oil Flipflops as US Growth Fears Counter Chinas Growth Outlook, UPDATE 1-NASA awards $425 mln to Boeing for fuel-efficient airliner research project, EU drug regulator has not seen signal of possible Pfizer COVID shot stroke link, David Rubenstein says the Fed will settle for 'tolerable' 3% inflation, doesn't see imminent recession. Palantir SBC is costly and is here to stay, therefore must be incorporated into a financial valuation. 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. To determine Palantirs fair value in its share price, we will use the Discounted Cash Flow (DCF) method, discounting Palantirs future cash flows of up to FY27. Certain assumptions have been made for modeling purposes and are unlikely to be realized. Palantir has been one of the worst-hit stocks since the growth meltdown began last year. This is the case for any IPO. Today, Palantir trades at $22, for a $42 billion market capitalization. These options were set to expire on Dec. 3, 2021. 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. Of course, revenue growth of 30% for the next several years is impressive. 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 Report: Palantir Technologies Inc. NYSE - Nasdaq Real Time Price. 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. 1125 N. Charles St, Baltimore, MD 21201. In fact, based on the companys FCF projections. 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). Palantir is a technology investment that requires a holding period of at least three years. 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). If history repeats itself, then PLTR stock could set up as a profitable trade. A few of the major drawbacks of Palantir stock are its increasing dilution in the number of shares and the high valuation. Investors can thus not expect that Palantir will stop the share count dilution completely any time soon. I appreciate your feedback, comments and questions. Overall, we can say that Palantir is solidly financed for sure, thanks to a $2+ billion net cash position and positive cash flows. 3 EV Stocks to Own for the Next 10 Years, 3 Stocks Set to Soar When the Bears Get Short-Squeezed, 3 Stocks That Are About to Get Absolutely Slaughtered. All rights reserved. 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. In the last quarter, Palantir reported a. in commercial revenue. has been a polarizing stock. In the Q3 2021 earnings conference call on Nov.9, he said, legacy compliance solutions are often 2 or more decades behind. If Palantir was growing its government side of the business at the exclusion of its commercial side, it would be concerning. 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. If other government agencies follow ICE's lead and adopt RAVEn or develop their own in-house data mining platforms, Palantir's government-facing business -- which already reported decelerating revenue growth over the past two quarters -- could face an unprecedented slowdown. InvestorPlace - Stock Market News, Stock Advice & Trading Tips. No cash balance or cash flow is included in the calculation. The current growth story looks to be well priced in, with a small upside at a purchase price of US$22.83 as of 15th Nov 21. The Investment Community where "Cash Flow is King". 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. 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. One of, if not THE most heavily compensated CEO of any US company in 2021. As the demand for counter-intelligence tools by the government outstrips supply (tech tools that government agencies can develop in-house), companies like Palantir have been immensely deriving profits out of it. The DCF valuation employs the Free Cash Flow to the Firm (FCFF) methodology to arrive at the intrinsic value of the company. If history repeats itself, then PLTR stock could set up as a profitable trade. Palantir has customers in the mobility space that includes original equipment manufacturers (OEM), their suppliers, EV charging companies, and insurers. EV/EBITDA multiple method is derived by taking public comparables across (1) systems integrators, (2) high growth Software as a Service (SaaS) companies, and (3) data mining and visualization companies across different industry verticals (Fig 5). This suggests the stock has no near-term upside. However, this secretive software firm that Moreover, the company still has huge room for growth as its AI-powered data mining tools are not going to lose importance anytime soon. Disclosure: At the time of publication, Hashtag Investing did not have a position in any of the securities mentioned in this article. 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. Leo Sun owns C3.ai, Inc. and Palantir Technologies Inc. Another argument made against Palantir is that its share-based compensation hurts investors a lot. 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. Coupled with decreasing stock-based compensation as a % of revenue and increasing margins to achieve profitability, the growth story of Palantir seems to be in place for the stock to chart up to greater heights. Please disable your ad-blocker and refresh. Insider sales are hurting shareholders. Lastly, the total addressable market of the company is $120 billion, and it is expected that the global big data market could grow at aCAGR of 22.4%through 2030. 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. I write about venture capital, equity research, and data analysis. Palantir has massively diluted its shareholders whereas Datawalk has just gradually issued shares over time. Specifically, backtested results do not reflect actual trading or the effect of material economic and market factors on the decision-making process. These contracts accounted for approximately 56% of the companys revenue in the third quarter. PLTR won't sink, but there will be a bit of pain to absorb. Go to company page Chief Operating Officer (COO) Shyam Sankar said three themes are driving operating margins. Subscribe right now because you get 14 days for FREE. Since trades have not actually been executed, results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity, and may not reflect the impact that certain economic or market factors may have had on the decision-making process. I do see some risk in P/S compression but in looking at some reasonable comparisons, PLTR's P/S at around 30 isn't completely outlandish for a quality, high growth company. And, that's why I emphasized adjusted numbers in Palantir: The Rule Of 40. Enter your email to receive our newsletter. The truth probably lies somewhere in between. Despite the long The information is not intended to be used as the basis of any investment decision by a person or entity. For the first three quarters of 2021, the company has revenue that exceeds $1.1 billion. (You are fully protected by Seeking Alpha's unconditional guarantee.). This information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. Palantir has never been a profitable companysince its inception. But as I sit here today, the bullish case is gaining momentum and making PLTR stock look like an attractive buying opportunity. 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. History suggests that SBC isn't a stock price killer. I wrote this article myself, and it expresses my own opinions. 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. Disclaimer: This initiated report is only a primer version it does not conduct a deep dive in the software-infrastructure technology market segment, but to incorporate managements overall guidance and analyse the companys operational structure to determine the fair value of the company. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. 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). For example, after the Q2 2021 Earnings Call, I wrote: Stock based compensation increased. He has been writing for InvestorPlace since 2019. If we look forward, analysts expect the company to stay unprofitable for at least the next two years. But this is a statistic that requires context. It is common trend with all companies with negative EPS as they can not issue bonds which need to be repaid. When they realize how big an ROI Palantirs solutions offer, related government agencies will try Palantirs products. they should be getting. It's still a major thorn in my side. With a market cap of $36 billion, Palantir is still valued at 24 times this year's sales. 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. 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. 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. Furthermore, PLTR has a narrative to maintain. Article printed from InvestorPlace Media, https://investorplace.com/2021/11/palantir-might-be-worth-the-buy-for-patient-investors/. 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. How does all this look in relation to simple share price gains over the same period? Second, it's bad but not super bad for PLTR. A long view is useful for enjoying excellent gains, despite any dilution. 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. *Average returns of all recommendations since inception. SBC and share dilution are annoying. Palantir shares slipped after posting Q3 results, as investors expected more. Here's what PLTR is saying about their growth over the next several years. Eng, Go to company page PLTR is sitting around P/S of 30 which seems somewhat reasonable, at least in relation to other hot, high growth stocks. For now, investors should assume the stock is stuck in a $22 $27 trading range because earnings per share are not expanding. And the companys overall revenue was up 36% YOY at $392 million. With good data and the right technology, people and institutions today can still solve hard problems and change the world for the better. From that standpoint, Palantirs future prospects make the dilution seem less intimidating. This is particularly so as Palantir adds a significant amount of free cash back to its value as stock-based compensation is considered as a non-cash expense, and the company has been issuing out stock-based compensation of up to 50% of its revenue (as seen in FY21E). ET. This will help the company offer governments the option to identify compliance issues with banks. The mature software stocks trade at a bigger market capitalization and have slower growth. As long as management grows the company faster than it dilutes shareholders, the stock will outperform the index. Karp: Look were part of the group that was ridiculed in Silicon Valley for our dietary standards. Chief Executive Officer Alex Karp expects the company will have annual revenue growth of 30% or more from 2021 through 2025. In fact, based on the companys FCF projections, InvestorPlace contributor Mark Hake has a price target of $38.81 for Palantir. It's my #1 issue with PLTR. Please. See for yourself. Nasdaq It primarily offers two solutions, namely Gotham and Foundry, which are software solutions for government departments and commercial companies respectively, and Apollo, the operating system for both those software. , Palantir recently made a large purchase of gold bars. Not surprisingly, Karp has sold a lot of these options recently. Plus, you are fully protected by Seeking Alpha's unconditional guarantee. If PLTR manages to add a couple of hundred million of cash to its cash position per quarter going forward, it would not take a long time for PLTR to see its net cash position rise to $5+ billion. Palantir expects revenue will grow by 40% to $1.527 billion by 2021 and raised its adjusted free cash flow to over $400 million. The value score is 42/100. Foundry has seen an incredible increase in commercial adoption this year, with the number of private sector customers rising by about 135% as of September 30. Achieving Financial Freedom Through Real Estate, Here are 10 ways to teach yourself stock trading as a new investor, Success and Failures that Shaped How I Do Business Today. 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%. 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). Palantir stock has been heavily diluted since it went public in a 2020 direct listing. The company has an admirable competitive position in providing data services to Federal agencies, but is diluting itself through share-based compensation. Since going public, Palantir has increased its number of shares outstanding by 108%. Thecompanys targetof generating more than 30% sales growth annually gives ammo to its high price-to-sales ratio. Dear MULN Stock Fans, Brace Yourself for a Reverse Stock Split. So I Therefore, it is aggressively investing in sustaining its position and presenting itself as the only viable military AI option for the democracies intending to withstand the technological advances and espionage threats on them. I have no business relationship with any company whose stock is mentioned in this article. Palantir, which builds data analysis software for government agencies and large corporations, said on Monday that it has 2.17 billion diluted shares. Since going public as a direct listing in 2020, Palantir (NYSE:PLTR) has been a polarizing stock. In an effort to guard against black swan events, Palantir recently made a large purchase of gold bars. Is This an Income Stream Which Induces Fear? The same was true for many other companies in a similar position, e.g. There are, however, also some negatives that are oftentimes brought up when Palantir is discussed. 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). Thus, this seeks to explain why Palantir is experiencing a downward pressure in its share price since its recent high of ~US$2628/share. Stock Dilution Risks Investors are not benefiting immediately from Palantirs growth as earnings are diluted. 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. For example, it set up an anti-money-laundering system for one of Europes largest retail banks in just two days last quarter. For example, Palantir is helping the National Health Service (NHS) analyze information for millions of patients. And, that's also in line with PLTR's long-term sales view, back from Q4 2020. 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. That's the point. WebPalantir Technologies Inc. (PLTR) NYSE - NYSE Delayed Price. 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. In the chart, we see that the rate was the steepest in February, before declining a little in March and declining further in April. Now, let's ignore share count just for a moment. eBay, Go to company page I have also generated over $30 million in online sales through my own business activities, along with several million dollar producing partners and affiliates. Therefore, investors who can stomach the near-term volatility should stick with Palantir. 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). Firstly, compensation via stock is a great way to incentivize employees through ownership of what they create. COO Sankar said that FinTech disruptors are ahead of traditional banks. Certainly, that's a view in the rearview mirror. It has a powerful A.I. The profusion of opinions on social media and financial blogs makes it impossible to distinguish between real growth potential and pure hype. 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. Over the past three months, Palantir's insiders sold 12.6 million shares while buying 11.8 million shares. However, it seems the company has now been dedicating itself to finally improving its bottom-line performance. Palantir said in its prospectus that 1.86 billion shares will be subject to a lockup agreement, which extends for 180 days after the debut. Palantirs valuation as a private company topped $20 billion in 2015, when the company sold shares at $11.38 a piece. Palantir can implement solutions quickly. On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. Someone else is enjoying the rewards. 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.) 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.. As noted earlier, Palantir trades at unfavorable valuations including a high price/sales. Proven research methods championed by growth stock investors like Peter Lynch, Richard Koch, and Phil Fisher. The portfolio's price can fluctuate, but the income stream remains consistent. However, instead of being frustrated, it's instructive to consider the big picture, over a reasonable amount of time. Making the world smarter, happier, and richer. Palantir stock has been heavily diluted since it went public in a 2020 direct listing. Backin 2020,it had generated a revenue of $1.09 billion along with a net loss of $1.17 billion. Breaking News Nov 28, 2022. Is this happening to you frequently? Raytheon It also announced it would accept payment in. Most investors dont have major gainers like TSLA or NVDA on their radar from the start. 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. News / Events / Financials. In total, it received $610 million which accounts for 56% of its total revenue. Palantir had a share price of $30. WACC (Fig 4) is estimated at 8.5% for Palantir. 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. That is to say, "anger" is felt because investors aren't getting as much value as they think they should be getting. 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. 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. TipRanks is a comprehensive research tool that helps investors make better, data-driven investment decisions. Both PYPL and ADBE were "cannibals" and appreciated over 600%. Third, its growth in healthcare is rising. Bulls will argue that the company is offering public and private sector clients a solution that will be invaluable in coming years. Since October 2020, Palantirs stocks 1-year return has outperformed a number of the worlds most popular media and tech companies: DIS, AAPL, TSLA, Theres likely a few reasons for Palantir to favour SBC over salary. Lets take a look at their Government and Commercial business. I am an investor, entrepreneur, father, husband, coach and teacher. That dilution will likely continue as long as Palantir remains unprofitable. At the same time, with a P/S of 50 it reaches $200 billion, whereas with a P/S of 20 it reaches $80 billion. Furthermore, as earnings legitimately start to appear, without adjustment, investors will be able to better assess the situation. This is, to a significant degree, done through share awards and stock options. Its CEO, for example, received a massive $1.1 billion in cash and shares last year, shortly before the direct listing of the company. 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. Stocks tumble, Apple slides as China COVID protests spook investors to start week 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. We essentially have built a food ontology that provides nutrition in mission critical systems. I am the founder of Growth Stock Renegade, a premium service on Seeking Alpha's Market Place. 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. But the good news is that Karp was by far the biggest holder of options. Palantirs historical numbers are consolidated from FY18 to FY20 and projections are conducted from FY21 to FY27. Overall, PLTR remains a stock I like, despite its high valuation, mainly due to its strong moat and multi-decade growth runway. The Motley Fool has a disclosure policy. Turning to Wall Street, PLTR stock has a Moderate Sell consensus rating. 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. (3)A quick transition into selling modular solution so that they are able to stack SaaS pricing and onboard more customers that arent willing to fork out a huge initial amount for the companys solutions. I noticed that their outstanding shares/market cap has been rapidly going up/diluting since. Palantir worked exclusively for the U.S. Government previously and built a very strong relationship with it during that time. As for me, I have to admit that PLTR stock is starting to look a lot more attractive at this price. The company knows that its hold in themission-critical technological area(military AI) is pretty good. I remain bullish. A new tech publication by Start it up (https://medium.com/swlh). Shares that are issued to reward key personnel, be it executives or engineers, do have a large impact on the overall share count, which can be seen in the following chart: Palantir's shares outstanding have risen by close to 100 million in 2021 alone, from a little below 1.8 billion to a little less than 1.9 billion. Not really. Further, backtesting allows the security selection methodology to be adjusted until past returns are maximized. The real question isn't compensation but dilution and share count. Palantir's stock was trading about 6.3% lower at $22.73 per share on Wednesday at the time of publication. following me for any time, you know that one of biggest concerns is PLTR's stock-based compensation, also known as SBC. 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?. Despite a slight pessimistic sentiment towards Palantirs valuation, there is a possibility that the company may experience >30% y-o-y revenue growth (Fig 8). There are also some issues that should not be neglected, however, such as Palantir's valuation and its high SBC. 18 of those deals were valued at $10 million or more. The company is one of the most trusted analytics platforms for the U.S. government and its allies. I am not receiving compensation for it (other than from Seeking Alpha). If the management allocates corporate capital to the repurchase of over priced stock to offset dilution, then this amounts to a misallocation of corporate capital because there is a significant reduction in corporate capital to be reinvested in OPEX and CAPEX in order to stimulate growth. Cornerstone, Go to company page Share dilution So according to their 10-k annual report, they have 1.792 billion outstanding shares and 743 million outstanding options (exercisable in the period of multiple years) as of end of 2020, of which 133 million of them will expire by end of 2022. I'll Avoid These Sectors In 2023 3:39AM ET 1/15/2023 Seeking Alpha. Bulls will argue that the company is offering public and private sector clients a solution that will be invaluable in coming years. Motley Fool Palantir Is Starting 2023 With A Bang Palantir Technologies (PLTR) has an average rating of hold and price targets ranging from $4.50 to $15, according to analysts polled by Capital IQ. Still, that valuation comparison is not fair. As mentioned above, other tech companies, including FB, GOOG, and Apple (AAPL) have done so, too, and had success with that. Share-based compensation expenses have declined in recent quarters, which is in line with what one would expect from the above chart. 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. Now that shares are down slightly, Palantir is a stock to consider again. In FY2020, its revenue grew 47%. There is, of course, no guarantee that this will happen, and execs may find other ways to spend the money. These multiples will be carried forward to our sensitivity analysis. (Cognitive Computing) This sounded like a huge red flag, but gave benefit of doubt since they've been private for so long. The average price target, based on analysts, is $22.60. I am bullish on PLTR stock. Today, Palantir trades at $22, for a $42 billion market capitalization. The Upside Potential for SOFI Stock Is Limited. Google. Financials. Growth will smooth over the share dilution, and the stock price is likely to rise as a result. Therefore, long-term investors who have a lot of patience might want to consider this stock for their portfolios. 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. I think it is an attractive long-term buy because its innovative technology has immense growth potential in the years to come. There's no dilution happening, they aren't issuing new shares. Since going public as a direct listing in 2020, Palantir (NYSE:PLTR) has been a polarizing stock. This is almost perfectly in line with the consensus price target of $21.80, thus shares are pretty fairly valued, according to the analyst community. Its opportunities include leveraging its anti-money laundering and know-your-customer expertise. 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. According to Tipranks, Jonathan is among the top 0.5% of bloggers (as of January 10, 2022: https://www.tipranks.com/bloggers/jonathan-weber). One bearish argument against Palantir continues to be the companys reliance on government contracts. values the company at around $40 billion. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. SHARE THIS POST 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. On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. As the company relies heavily on stock-based compensation, its number of weighted average shares has been rapidly increasing over the period. 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. contributing author for InvestorPlace.com and numerous other financial sites. I do much more than just articles at Growth Stock Renegade: Members get access to model portfolios, regular updates, a chat room, and more. I am not receiving compensation for it (other than from Seeking Alpha). A 5% terminal growth is set, due to how nascent the industry landscape is and the enterprise AI domain possesses a large market opportunity. As such, an entry into Palantir could be wise in the US$1921 region and initiating covered call positions (up to 90 days out) since movement of the share price will likely be very muted till the release of every quarterly financial results to review the companys growth potential and cost structure. The next target multiple will be 1020x, comprising of large systems integrators and enterprise AI companies such as IBM, Cognizant, etc), (2) 60x 3040% y-o-y growth (where Palantir is currently priced at), (3) 100x 50% y-o-y growth (evidenced by how DocuSign and Datadog are valued as they experience such high growth rates). Palantirs share price has undergone loads of controversy in terms of the forecasted direction and the possibility of a huge potential upside. Due to the fact that a high-growth company also has many other ways to invest its operating cash flows, apart from using them for buybacks, it seems likely that buybacks will not be a priority in 2021 and 2022, and possibly beyond that. Further, CEO Alex Karp posited a 40% revenue growth for FY21 and a sustained 30% y-o-y growth up to FY25. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. Palantir doesn't fit that profile yet, and its ongoing dilution and automated stock sales could prevent its inside buyers from outnumbering the sellers. Someone else is enjoying the rewards. Please note all regulatory considerations regarding the presentation of fees must be taken into account. The amount of drag is dictated by a combination of dilution and growth. The TipRanks Smart Score performance is based on backtested results. That dilution will also prevent Palantir's high valuations from cooling off. Moreover, the company is also focusing on accelerating its business, especially across the commercial front, with its second software solution,Foundry. I'll have to review this more closely in a future article. 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. We have war fighters who follow our nutrition. Backtested performance is developed with the benefit of hindsight and has inherent limitations. On the other, bears are not wrong to criticize Palantir's cash-burning problem and excessive stock-based compensation, which keeps diluting shareholders to oblivion. Here I do see a stronger relationship between share count and price. Palantir has a strong moat that gives customers an edge. Thankfully for them, government contracts last many years. Facebook (FB) or Alphabet (GOOG) (GOOGL) when they were smaller. Plus, there is a 14-day FREE TRIAL. The stock has a 52-week high of $45 and a 52-week low of $14.40. Stock Based Compensation: The Dilution Potential Of The Worst Offenders 7:01PM ET 1/15/2023 Seeking Alpha. 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. Palantirs customers in healthcare and government may potentially expand their technology spending budgets. In the last quarter, Palantir reported a 37% year-over-year (YOY) increase in commercial revenue. Of particular concern was the approximately. Commercial revenue accounted for 44% of the total in Q3. 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. Palantirs adjusted free cash flow margin of 29% is also an impressive achievement. Forget Tesla! Please disable your ad-blocker and refresh. The future looks bright. I hope to see you inside Growth Stock Renegade. 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. 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. (See Analysts Top Stocks on TipRanks). This is all very rough, of course. 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. Third, there's a good reason for SBC and therefore share dilution. Palantir is a high-growth company that operates worldwide in both commercial and government segments. I wrote this article myself, and it expresses my own opinions. Value investors could buy Microsoft (NASDAQ:MSFT) at 14 times sales or Oracle (NYSE:ORCL) at 6.8 times. Palantir Technologies Inc. shares fell the most in almost a year after the data software company reported financial results that illustrated a continued lack of net profit. Since one of 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.

Gordon Cooper Daughters, Importance Of Set Design In Theatre, Focaccia Invented In 1975, Ziggys Custom Barrels, How To Add Milestone In Projectlibre, Viking Rune Translator, Sam Inc Wellsboro, Pa, Richard Rawlings New Wife 2020, Harold Dieterle Meredith Lynn Davies, Whatever Happened To Craig Wasson,