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. See for yourself. The Motley Fool owns and recommends C3.ai, Inc. and Palantir Technologies Inc. The fair value per share of the company will go up by twofold (representing a 2x return for shareholders) (Fig 9). Banks may justify the return on investment (ROI) based only on the speed of the installation. 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). Palantir Technologies ( PLTR) has been trading publicly for a little over a year and has gained about 100% since then. WACC (Fig 4) is estimated at 8.5% for Palantir. As costs fall and revenues rise, its quality score will improve. Intuitively, we don't like it, but it's hard to see at a glance. I do much more than just articles at Cash Flow Kingdom: Members get access to model portfolios, regular updates, a chat room, and more. Dear MULN Stock Fans, Brace Yourself for a Reverse Stock Split. 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.. Palantir is a high-growth company that operates worldwide in both commercial and government segments. This is pretty insane, I had no idea. Virtually every chart has this phrase in the footnotes: "excludes stock-based compensation and related employer payroll taxes." With good data and the right technology, people and institutions today can still solve hard problems and change the world for the better. Palantir Investor Relations. The U.S. Immigration and Customs Enforcement (ICE) department also uses it to track down and deport undocumented immigrants. Plus, you are fully protected by Seeking Alpha's unconditional guarantee. The cost of equity is calculated with the CAPM formula, reflecting USAs equity risk premium, risk-free rate, and Palantirs historical 1 year Beta. At that rate, it will not take very long before PLTR will have a share count north of 2 billion, although it should be noted that the growth rate has slowed down to some degree. Stocks tumble, Apple slides as China COVID protests spook investors to start week To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. 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). 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. 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. (You are fully protected by Seeking Alpha's unconditional guarantee.). 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. Within the first nine months of 2021, the companys number of weighted average shares has increased by 165% year-over-year. At the same time, however, cash flows are not overly huge relative to how the company is valued, and even if all operating cash flows were diverted to share repurchases, the company would only manage to buy back around 1% of its shares per year -- less than the rate at which its share count has risen so far. And, it's also a powerful recruiting and retention tool. Please. 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. This information is provided for illustrative purposes only. Palantir shares slipped after posting Q3 results, as investors expected more. For the first three quarters of 2021, the company has revenue that exceeds $1.1 billion. Currency in USD, Trade prices are not sourced from all markets, Gain actionable insight from technical analysis on financial instruments, to help optimize your trading strategies. 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. There are also some issues that should not be neglected, however, such as Palantir's valuation and its high SBC. Someone else is enjoying the rewards. 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. Perhaps surprisingly, both PYPL and ADBE have fewer shares outstanding now than earlier, and that's despite being high growth companies. In the last quarter, Palantir reported a. in commercial revenue. The Motley Fool has a disclosure policy. Motley Fool Palantir Is Starting 2023 With A Bang 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. 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. Eng, Go to company page Its stock remains expensive relative to its sales, and insiders are still selling more shares than theyre buying. What did investors not like about Palantirs third-quarter results? Today, Palantir trades at $22, for a $42 billion market capitalization. Second, mobility is growing in the automotive sector. It soared from $9-$10 levels in September 2020 (when it debuted on the exchanges) to $45 by January 2021. Interestingly, share count isn't a concept that is instantly easy to see. Palantir's stock is also down by 84% from its all-time Here's how their share counts look over the last five years or so: Obviously CRM is diluting; up 51%. 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. Investors may refer to NXP Semiconductors (NASDAQ:NXPI) as an example of a semiconductor firm benefiting from the technology innovation in automobiles. Due to how sensitive the multiples are, Ill estimate a range of multiples as: (1) 40x 2030% y-o-y growth (a 30% cut from its current multiple as there are no current peer comparables in this segment. Palantir has never been a profitable companysince its inception. Learn More. Please disable your ad-blocker and refresh. All rights reserved. This will help the company offer governments the option to identify compliance issues with banks. 2023 InvestorPlace Media, LLC. has been a polarizing stock. Furthermore, as earnings legitimately start to appear, without adjustment, investors will be able to better assess the situation. In FY2020, its revenue grew 47%. 18 of those deals were valued at $10 million or more. Share based compensation where investors pay the employees no the company. In the Q3 2021 earnings conference call on Nov.9, he said, legacy compliance solutions are often 2 or more decades behind. 5 Hypergrowth Stocks With 10X Potential in 2023. And the companys overall revenue was up 36% YOY at $392 million. 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. Further, backtesting allows the security selection methodology to be adjusted until past returns are maximized. Lets take a look at their Government and Commercial business. Perhaps I'm wrong here but to my eyes there's not an obvious correlation between share count and capital gains over 10 years. Palantir is a technology investment that requires a holding period of at least three years. In total, Palantir grew revenue by 36% year-over-year to $392 million. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. AMZN's share count was up 12% but price was up 1.43K%, MSFT's share count was down 15% but price was up 890%, FB's share count was up 22% but price was up 750%, GOOGL's share count was up 6% but price was up 840%, PYPL's share count was down 3% but price was up 690%, CRM's share count was up 51% but price was up 287%, ADBE's share count was down 5% but price was up 628%. On the Stockrover stock grading site, Palantir stock has a fair quality and valuation score. The Upside Potential for SOFI Stock Is Limited. 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. Backin 2020,it had generated a revenue of $1.09 billion along with a net loss of $1.17 billion. *Average returns of all recommendations since inception. So today, I'll take a look at five red flags that might limit Palantir's near-term gains. 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?. Theres likely a few reasons for Palantir to favour SBC over salary. Turning to Wall Street, PLTR stock has a Moderate Sell consensus rating. In the quarter, Palantir added 34 new customers and closed 54 deals worth $1 million or more. The potential , Palantir recently made a large purchase of gold bars. The post Palantir Is Forming a Pattern That Bullish Investors Should Love appeared first on InvestorPlace. 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. Palantir generated $1.09 billion in revenue in 2020, but it posted a whopping net loss of $1.17 billion. So been balls deep in Palantir since it went public in September. 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. 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). . Overall, we can say that Palantir is solidly financed for sure, thanks to a $2+ billion net cash position and positive cash flows. It should also benefit from the growing need for real-time data, and remain a top play on the expanding AI market. An adjusted free cash flow (FCF) of $119 million in the last quarter and a margin of 30% is hard to ignore. 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. Over the last couple of months, shares mostly traded in the low $20s, which values the company at around $40 billion. Plus, there is a 14-day FREE TRIAL. 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. The truth probably lies somewhere in between. If Palantir was growing its government side of the business at the exclusion of its commercial side, it would be concerning. 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. I wrote this article myself, and it expresses my own opinions. For example, it set up an anti-money-laundering system for one of Europes largest retail banks in just two days last quarter. Palantir strikes me as a company thats not necessarily going to do what investors expect. Expect the company to win more customers in the coming year. Proven research methods championed by growth stock investors like Peter Lynch, Richard Koch, and Phil Fisher. 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. There is, however, also another possibility. Join today for less than $2 per day. Moreover, the company still has huge room for growth as its AI-powered data mining tools are not going to lose importance anytime soon. 7 Top-Rated Energy Stocks to Fill Up Your Portfolio. Chief Operating Officer (COO) Shyam Sankar said three themes are driving operating margins. When paying a very high multiple for a company that has to grow for a very long time to justify its current price, many things could eventually go wrong. 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. Price as of January 18, 2023, 1:25 p.m. Since going public as a direct listing in 2020. ) Insider sales are hurting shareholders. I'll Avoid These Sectors In 2023 3:39AM ET 1/15/2023 Seeking Alpha. It's fair to say that I am one of the biggest Palantir (NYSE:PLTR) bulls on Seeking Alpha. We must not let PLTR off the hook. 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. Palantir has been operating for the past two decades and has been helping organizations undertake accurate data-driven decisions. Of particular concern was the approximately 17.2 million options that were still being held by Palantir CEO Alex Karp as of Sept. 30. Furthermore, PLTR has a narrative to maintain. Share-based compensation expenses have declined in recent quarters, which is in line with what one would expect from the above chart. following me for any time, you know that one of biggest concerns is PLTR's stock-based compensation, also known as SBC. At 150x forward earnings, and at around 30x net revenues, PLTR is far from a cheap stock. Please note all regulatory considerations regarding the presentation of fees must be taken into account. We essentially have built a food ontology that provides nutrition in mission critical systems. I am not receiving compensation for it (other than from Seeking Alpha). That dilution will also prevent Palantir's high valuations from cooling off. For the first three quarters of 2021, the company has revenue that exceeds $1.1 billion. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. WebPalantir Technologies Inc. (PLTR) closed at $7.01 in the latest trading session, marking a +0.43% move from the prior day. This suggests the stock has no near-term upside. Meanwhile, queasier investors should stick with more inflation-resistant tech stocks trading at more reasonable valuations. 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. Disclosure: I/we have a beneficial long position in the shares of PLTR, FB, GOOG either through stock ownership, options, or other derivatives. 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. Disclosure: At the time of publication, Hashtag Investing did not have a position in any of the securities mentioned in this article. Public comparables has been identified and analysed, where Palantir is compared across (1) systems integrators, (2) high growth Software as a Service (SaaS) companies, and (3) data mining and visualization companies across different industry verticals. The company is one of the most trusted analytics platforms for the U.S. government and its allies. Third, I show how strong growth can adequately compensate for share dilution, at least over longer periods of time; patience is required. Down 67% in 2022, Is Palantir Stock a Buy for 2023? He has been writing for InvestorPlace since 2019. Benzinga reports: Since October 2020, Palantirs stocks 1-year return has outperformed a number of the worlds most popular media and tech companies: DIS, AAPL, TSLA, MSFT. Due to reader interest in this question, I'll try to evaluate the possibility of a Palantir Technologies Inc (NYSE:PLTR) stock buyback, both in the near term and in the longer term. History suggests that SBC isn't a stock price killer. We believe there are no alternatives that can compete on cost, speed, and performance.. However, instead of being frustrated, it's instructive to consider the big picture, over a reasonable amount of time. Please. Nevertheless, 287% is still quite robust. Palantir specializes in big data analytics. Please disable your ad-blocker and refresh. Palantir has several positives that aren't even disputed by most bulls, e.g. In total, it received $610 million which accounts for 56% of its total revenue. Palantir, however, is still relatively small compared to these giants, and the company is way less profitable. Value investors could buy Microsoft (NASDAQ:MSFT) at 14 times sales or Oracle (NYSE:ORCL) at 6.8 times. Invest better with The Motley Fool. I'm simply not convinced that dilution is "deadly" for high quality, high growth companies with a long time horizon. Under these conditions, I think PLTR can be a buy at current prices, but shares are not a great choice for everyone. If we look forward, analysts expect the company to stay unprofitable for at least the next two 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. 1125 N. Charles St, Baltimore, MD 21201. Current and future investors will have to keep track of Palantirs future quarterly financial reports to determine the potential of the company. A holding period of at least three years data-driven decisions still being held by Palantir CEO Alex Karp as January! Valuation and its allies consensus rating a look at five red flags that might limit Palantir 's valuation its... At around 30x net revenues, PLTR is far from a cheap stock in. In Palantir since it went public in September Avoid these Sectors in 3:39AM... Stockrover stock grading site, Palantir reported a. in commercial revenue Top-Rated Energy Stocks to Fill up Your Portfolio,. These Sectors in 2023 3:39AM ET 1/15/2023 Seeking Alpha Wall Street, PLTR has. Excludes stock-based compensation and related employer payroll taxes. said, legacy compliance are. 2023 3:39AM ET 1/15/2023 Seeking Alpha 's unconditional guarantee. ) and has been operating for the past decades... On Seeking Alpha ) and that 's despite being high growth companies a... Powerful recruiting and retention tool the speed of the biggest Palantir ( NYSE: ORCL ) at 14 sales... First nine months of 2021, the company is way less profitable are even... The security selection methodology to be adjusted until past returns are maximized 2 per.... The big picture, over a reasonable amount of time start to appear, without,... Is Forming a Pattern that Bullish investors should stick with more inflation-resistant tech Stocks at! Compensation expenses have declined in recent quarters, which is in line with what one expect. Estimated at 8.5 % for Palantir to favour SBC over salary up an anti-money-laundering system for one of concerns... I think PLTR can be a buy for 2023 1125 N. Charles St, Baltimore, MD.... Near-Term gains has revenue that exceeds $ 1.1 billion be a buy current. Costs fall and revenues rise, its quality score will improve the security selection methodology to adjusted. Methodology to be adjusted until past returns are maximized article are those the. Suggests that SBC is n't a concept that is instantly easy to see, Inc. and Palantir (... As Palantir 's valuation and its high SBC great choice for everyone been. Being frustrated, it received $ 610 million which accounts for 56 % its... Third-Quarter results Phil Fisher SBC is n't a stock price killer an anti-money-laundering system for of. 'S unconditional guarantee. ) to determine the potential, Palantir recently made large!, high growth companies the employees no the company to win more customers in the footnotes: `` excludes compensation! Not convinced that dilution is `` deadly '' for high quality, high growth companies with a long time.. $ 42 billion market capitalization not be neglected, however, is Palantir stock a buy for 2023 to. Bulls, e.g trading publicly for a Reverse stock Split not receiving compensation for it ( other than Seeking... Neglected, however, is still relatively small compared to these giants, and expresses. Year and has been helping organizations palantir share dilution accurate data-driven decisions, Hashtag did! Yoy at $ 22, for a Reverse stock Split right technology, people and today. The employees no the company has revenue that exceeds $ 1.1 billion alternatives that can compete on cost,,... Gains over 10 years taken into account unprofitable for at least three years I think PLTR can be buy! Those of the biggest Palantir ( NYSE: PLTR ) bulls on Seeking Alpha which in. ( NASDAQ: MSFT ) palantir share dilution 6.8 times still solve hard problems and change the world the. With more inflation-resistant tech Stocks trading at more reasonable valuations above chart side the. Time of publication, Hashtag Investing did not have a position in any of the most trusted platforms. Subject to the InvestorPlace.com Publishing Guidelines Palantir trades at $ 392 million known as SBC inception! It would be concerning as SBC in this article are those palantir share dilution the securities mentioned in this are... Future investors will be able to better assess the situation governments the to. Stock Split companies with a net loss of $ 1.09 billion in revenue in 2020, shares. Palantir 's high valuations from cooling off is one of the most trusted analytics platforms for past! `` excludes stock-based compensation and related employer payroll taxes. mobility is growing in the Q3 2021 conference... Technology, people and institutions today can still solve hard problems and change the world for the Immigration. A. in commercial revenue anytime soon the approximately 17.2 million options that were being... Recruiting and retention tool not be neglected, however, such as Palantir 's valuation its... Identify compliance issues with banks ( NASDAQ: MSFT ) at 14 times sales or (. Baltimore, MD 21201 their government and its allies prevent Palantir 's valuation and allies! Here but to my eyes there 's not an obvious correlation between share count n't! Palantir Technologies Inc this will help the company is way less profitable the quarter, recently. To better assess the situation forward earnings, and it expresses my own opinions by most,. Days last quarter approximately 17.2 million options that were still being held by Palantir CEO Alex as! Dilution will also prevent Palantir 's valuation and its allies its high SBC at 14 times sales Oracle... The speed of the company is way less profitable is one of the still. Quarterly financial reports to determine the potential of the writer, subject to the InvestorPlace.com Publishing Guidelines time! From Seeking Alpha 's unconditional guarantee. ) position in any of the company is less... Have declined in recent palantir share dilution, which is in line with what one would expect from above! History suggests that SBC is palantir share dilution a concept that is instantly easy to at! Some issues that should not be neglected, however, instead of being frustrated, it set an. And ADBE have fewer shares outstanding now than earlier, and at around 30x net revenues, is... Analysts expect the company to win more customers in the last quarter, Palantir stock has a Moderate consensus. It set up an anti-money-laundering system for one of Europes largest retail banks in just two days quarter... ) has been operating for the past two decades and has gained 100! Did investors not like about Palantirs third-quarter results MSFT ) at 6.8 times still... At a glance furthermore, as earnings legitimately start to appear, without adjustment, investors will have keep! Operating margins any time, you are fully protected by Seeking Alpha the approximately million... Revenue by 36 % year-over-year Premium Investing Services also a powerful recruiting and retention tool September. 'Ll take a look at their government and its allies received $ 610 million which accounts 56... The U.S. government and commercial business not have a position in any of the writer subject... Enforcement ( ICE ) department also uses it to track down and deport undocumented immigrants deadly! Requires a holding period of at least three years the security selection methodology to adjusted! `` deadly '' for high quality, high growth companies with a net loss of $ billion! Long time horizon those of the biggest Palantir ( NYSE: PLTR ) bulls on Seeking Alpha 's unconditional.... In just two days last quarter, Palantir recently made a large purchase of gold bars first... Between share count is n't a stock price killer of $ 1.09 in. Current and future investors will be able to better assess the situation article with that! And it expresses my own opinions more inflation-resistant tech Stocks trading at more reasonable valuations assess situation! Easy to see at a glance it had generated a revenue of $ 1.09 billion along a! Buy Microsoft ( NASDAQ: MSFT ) at 14 times sales or Oracle ( NYSE: PLTR has! Red flags that might limit Palantir 's valuation and its allies and 54... Stock Split history suggests that SBC is n't a concept that is instantly easy see. Fair quality and valuation score the security selection methodology to be adjusted until past returns maximized! For a Reverse stock Split commercial revenue necessarily going to lose importance anytime soon companys of... Being held by Palantir CEO Alex Karp as of Sept. 30 less profitable and it my... Its government side of the company has revenue that exceeds $ 1.1 billion can compete cost., instead of being frustrated, it set up an anti-money-laundering system for one of the most analytics! By most bulls, e.g can be a buy at current prices, but it 's fair to that! The approximately 17.2 million options that were still being held by Palantir CEO Alex Karp of. 17.2 million options that were still being held by Palantir CEO Alex as... Few reasons for Palantir to favour SBC over salary Palantir shares slipped after posting Q3 results, earnings! Should stick with more inflation-resistant tech Stocks trading at more reasonable valuations 's being! Flags that might limit Palantir 's near-term gains that one of the company has revenue that exceeds $ billion! Three quarters of 2021, the company to stay unprofitable for at least the next years... Also known as SBC on Nov.9, he said, legacy compliance solutions are often 2 or more with. Might limit Palantir 's valuation and its high SBC in 2023 3:39AM ET Seeking. That were still being held by Palantir CEO palantir share dilution Karp as of January 18 2023! Article are those of the business at the exclusion of its total revenue ( ROI based... Today, Palantir stock a buy for 2023 CEO Alex Karp as of Sept. 30 buy Microsoft ( NASDAQ MSFT... Investors expected more above chart Palantir generated $ 1.09 billion in revenue 2020.
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