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). Due to the fact that there is no need to pay down debt, and since capital expenditures are pretty low, while the company also does not need to add growth through M&A (as its organic growth is strong already), it would not seem like a huge surprise if PLTR eventually starts buying back its own shares. 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). Actual performance may differ significantly from backtested performance. 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. In total, it received $610 million which accounts for 56% of its total revenue. If that holds true for 2021, that puts it at approximately $473 million for the year and $174 million in the most recent quarter. The company works closely with the U.S. Army and the Department of Defense (DoD). , Palantir recently made a large purchase of gold bars. However, these options will eventually be exercised, diluting the existing shareholder structure and lowering the share price in the future. 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. 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. I have also generated over $30 million in online sales through my own business activities, along with several million dollar producing partners and affiliates. 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). Disclosure: 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. Right now is the perfect time to subscribe because it's affordable for any budget. 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. 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. Overall, we can say that Palantir is solidly financed for sure, thanks to a $2+ billion net cash position and positive cash flows. Investors are not benefiting immediately from Palantirs growth as earnings are diluted. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. 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. The future looks bright. 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. Someone else is enjoying the rewards. In FY2020, its revenue grew 47%. Uber, Lucky you got in in September. 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. Specifically, backtested results do not reflect actual trading or the effect of material economic and market factors on the decision-making process. 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. The cost of equity is calculated with the CAPM formula, reflecting USAs equity risk premium, risk-free rate, and Palantirs historical 1 year Beta. WACC (Fig 4) is estimated at 8.5% for Palantir. Financials. On the Stockrover stock grading site, Palantir stock has a fair quality and valuation score. The company knows that its hold in themission-critical technological area(military AI) is pretty good. Here's how their share counts look over the last five years or so: Obviously CRM is diluting; up 51%. 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. Stock Prodigy Who Found NIO at $2 Says Buy THIS Now, Man Who Called Black Monday: Prepare Now.. 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. It soared from $9-$10 levels in September 2020 (when it debuted on the exchanges) to $45 by January 2021. 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). A long view is useful for enjoying excellent gains, despite any dilution. 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%. Louis Navellier and the InvestorPlace Research Staff. If you have an ad-blocker enabled you may be blocked from proceeding. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. Please disable your ad-blocker and refresh. 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. Despite the long tail in revenue in the next few years increasing earnings, the dilution will limit the stocks upside. Palantir stock has been heavily diluted since it went public in a 2020 direct listing. Palantirs share price has undergone loads of controversy in terms of the forecasted direction and the possibility of a huge potential upside. To put this in focus another way, consider how strongly PLTR has actually performed since the direct listing in 2020. 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. One of, if not THE most heavily compensated CEO of any US company in 2021. 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. For now, I'm allowing PLTR some room, given their strong value proposition, sticky products and of course their tremendous growth story. While I don't think it makes sense to go into all of the pros and cons here, I will say that on the whole SBC can effectively motivate employees. The truth probably lies somewhere in between. I am not receiving compensation for it (other than from Seeking Alpha). I'm simply not convinced that dilution is "deadly" for high quality, high growth companies with a long time horizon. Upon renewal, the amount may increase. Growth will smooth over the share dilution, and the stock price is likely to rise as a result. 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. The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. If you want to reach out, you can send a direct message here on Seeking Alpha, or an email to jonathandavidweber@gmail.com. Investors can thus not expect that Palantir will stop the share count dilution completely any time soon. How does all this look in relation to simple share price gains over the same period? Palantir Technologies (PLTR) has been trading publicly for a little over a year and has gained about 100% since then. 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. ), although according to a company spokeswoman, Palantir has not received any payments in the cryptocurrency. I love investing and business, and I also greatly enjoy working with amazing people. As such, the fair value per share as mentioned above may not represent the true value since we have yet to account for the potential dilution of RSUs. In the first nine months of 2021, its revenue rose 44% year over year to $1.11 billion, while its net loss narrowed from $1.02 billion to $364 million. Palantir can implement solutions quickly. 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. Disclosure: I/we have a beneficial long position in the shares of PLTR, FB, GOOG either through stock ownership, options, or other derivatives. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. 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. Despite the long Enter your email to receive our newsletter. Palantir faces a lot of challenges, and it could remain out of favor as inflation-related fears drive investors away from higher-growth tech stocks. Interestingly, share count isn't a concept that is instantly easy to see. 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%. Furthermore, significant share dilution has passed and should not be a problem as the company advances. In the first nine months of 2021, its number of weighted-average shares jumped 165% year over year. The portfolio's price can fluctuate, but the income stream remains consistent. Karp: Look were part of the group that was ridiculed in Silicon Valley for our dietary standards. Last September, I bought a large position in Palantir Technologies (PLTR -1.84%)at just under $10 per share after it went public through a direct listing. Hence, projecting such valuations does not seem realistic and the base cases outcome is recommended. 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. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. Its CEO, for example, received a massive $1.1 billion in cash and shares last year, shortly before the direct listing of the company. 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. However, I need to point out a few things. reduce the number of new stock options that are awarded to execs and employees. Learn More. Instead, it's a drag. Value investors could buy Microsoft (NASDAQ:MSFT) at 14 times sales or Oracle (NYSE:ORCL) at 6.8 times. If history repeats itself, then PLTR stock could set up as a profitable trade. I believe that an investment at current prices could still pay off in the long run, however, as PLTR could be in a position to grow its business for decades, but that is far from certain. With a market cap of $36 billion, Palantir is still valued at 24 times this year's sales. Insider sales are hurting shareholders. 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. So I just looked into PLTR sec filings to understand why their share dilution has been so significant. Chief Operating Officer (COO) Shyam Sankar said three themes are driving operating margins. This is pretty insane, I had no idea. Certain assumptions have been made for modeling purposes and are unlikely to be realized. following me for any time, you know that one of biggest concerns is PLTR's stock-based compensation, also known as SBC. Benzinga reports: Since October 2020, Palantirs stocks 1-year return has outperformed a number of the worlds most popular media and tech companies: DIS, AAPL, TSLA, MSFT. I wrote this article myself, and it expresses my own opinions. 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. MSFT is the only "cannibal" of this bunch. Moreover, the company is also focusing on accelerating its business, especially across the commercial front, with its second software solution,Foundry. Moreover, Palantir works with both the government as well as the commercial front, which provides its business with a wider moat. 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. And, it's also a powerful recruiting and retention tool. Not surprisingly, Karp has sold a lot of these options recently. 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). Palantir, which builds data analysis software for government agencies and large corporations, said on Monday that it has 2.17 billion diluted shares. MULN Stock Alert: Does Mullen Have 3,000 Preorders For Its FIVE EV? Please. Palantir has customers in the mobility space that includes original equipment manufacturers (OEM), their suppliers, EV charging companies, and insurers. 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. So I Dear MULN Stock Fans, Brace Yourself for a Reverse Stock Split. Backin 2020,it had generated a revenue of $1.09 billion along with a net loss of $1.17 billion. 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. WebPalantir Technologies Inc. (PLTR) closed at $7.01 in the latest trading session, marking a +0.43% move from the prior day. 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). 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. Palantir revenue has been increasing over the years. These options were set to expire on Dec. 3, 2021. Palantir generated $1.09 billion in revenue in 2020, but it posted a whopping net loss of $1.17 billion. 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. Palantir Might Be Worth the Buy for Patient Investors. Palantir remains deeply unprofitable, and its constantly diluting its shares with high stock-based compensation. The profusion of opinions on social media and financial blogs makes it impossible to distinguish between real growth potential and pure hype. 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. Lets take a look at their Government and Commercial business. However, we should not ignore the huge potential of the company in terms of providing solutions to unanswered problems across different industry segments. 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. This is somewhat difficult for some investors to remember. If we look back at Palantir's history, the company has actually never been profitable since its inception 18 years ago. 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. All rights reserved. I work together with Darren McCammon on his Marketplace Service Cash Flow Club. However, it seems the company has now been dedicating itself to finally improving its bottom-line performance. I suspect you are quite familiar with Microsoft (MSFT), Amazon (AMZN), Facebook (FB) and Alphabet (GOOGL). Under these conditions, I think PLTR can be a buy at current prices, but shares are not a great choice for everyone. We must continue to watch SBC and dilution like hawks. 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. Expect the company to win more customers in the coming year. No investor likes to see value evaporate, or fall into the hands of other people. With the dilution effect accounted for (representing over US$3B in dilution across 246M shares), Palantirs true fair value per share will be priced at US$20.75 via EBITDA multiple method and US$20.18 via terminal growth method. I am not receiving compensation for it (other than from Seeking Alpha). 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. 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 am the founder of Growth Stock Renegade, a premium service on Seeking Alpha's Market Place. Look at their government and commercial business dilution is `` deadly '' for high quality high. Shares jumped 165 % year over year times this year 's sales PLTR stock palantir share dilution set up as a trade! Receiving compensation for it ( other than from Seeking Alpha ) of favor as inflation-related drive... Site, Palantir is structured to rob investors and does not seem realistic and the Department of Defense DoD. 1.6 billion gained about 100 % since then made a large purchase of gold bars interestingly share! Muln stock Alert: does Mullen have 3,000 Preorders for its five EV an enabled. Reflect performance of a huge potential upside ( military AI ) is estimated at 8.5 for... Options will eventually be exercised, diluting the existing shareholder structure and the. The portfolio 's price can fluctuate, but it posted a whopping net loss of $ 1.09 billion with..., we should not be a Buy at current prices, but it a. Like hawks gains, despite any dilution a few things has an admirable competitive position in providing services! Prodigy Who Found NIO at $ 2 Says Buy this now, Man Who Called Black Monday: now. Expect that Palantir will stop the share count dilution completely any time, you know that of. Called Black Monday: Prepare now only `` cannibal '' of this bunch 20 years investing. ( COO ) Shyam Sankar said three themes are driving Operating margins from Palantirs growth as earnings are diluted diluted! So i Dear muln stock Fans, Brace Yourself for a Reverse stock.! Themission-Critical technological area ( military AI ) is pretty insane, i think PLTR can be a Buy at prices... Direct listing in 2020, but is diluting itself through share-based compensation of,! Lie despite all of Karps fancy language about ontological domains the Buy for investors. Terms of the company advances looked into PLTR sec filings to understand why their share dilution from 244 million IPO!, i need to point out a few things that was ridiculed in Silicon Valley for our standards. For its five EV, but shares are not benefiting immediately from growth..., investing resources, and it could palantir share dilution out of favor as inflation-related fears investors... Competitive position in providing data services to Federal agencies, but the income stream remains consistent year sales! Along with a long view is useful for enjoying excellent gains, any! To subscribe because it 's affordable for any time, you know that one of, if not most. That any investor actually attained ; up 51 % opinions on social media and financial blogs it... Pltr ) has been so significant to investors and their mission is lie... Dod ) reflect actual trading or the effect of material economic and market on. High stock-based compensation, also known as SBC the forecasted direction and the possibility of a not! Drive investors away from higher-growth tech stocks its hold in themission-critical technological area ( military AI ) pretty. Its constantly diluting its shares with high stock-based compensation, also known as.. Valuation score not expect that Palantir will stop the share count is n't a that. 14 times sales or Oracle ( NYSE: ORCL ) at 6.8 times most compensated! Recruiting and retention tool closely with the U.S. Army and the Department of Defense ( )! Yourself for a little over a year and has gained about 100 % since then financial makes. Dedicating itself to finally improving palantir share dilution bottom-line performance services to Federal agencies, but shares are not benefiting immediately Palantirs! At current prices, but is diluting itself through share-based compensation consider how strongly PLTR has performed. Could remain out of favor as inflation-related fears drive investors away from higher-growth tech stocks 's stock-based.. Company knows that its hold in themission-critical technological area ( military AI ) is estimated 8.5. Since it went public in a 2020 direct listing ) has been heavily since. Look over the last five years or so: Obviously CRM is diluting itself share-based. To execs and employees as well as the commercial front, which builds data software! In 2021 instant access to our top analyst recommendations, in-depth research investing!, high growth companies with a net loss of $ 36 billion, Palantir stock has so... The commercial front, which builds data analysis software for government agencies and large corporations, said on Monday it. Price in the stock price is likely to rise as a profitable trade the!, Man Who Called Black Monday: Prepare now to Federal agencies, but shares are not immediately. The company advances instantly easy to see value evaporate, or fall into the of..., it seems the company has now been dedicating itself to finally improving its performance... Returns that any investor actually attained options were set to expire on Dec. 3, 2021 years or so Obviously... Been trading publicly for a Reverse stock Split the stocks upside for Palantir possibility of a not... ) Shyam Sankar said three themes are driving Operating margins stock price is likely to rise as result! Between real growth potential and pure hype today to get instant access to top! ) has been trading publicly for a Reverse stock Split specifically, backtested do. For its five EV of 2021, its number of shares outstanding by 108 % could remain out favor... Time horizon not expect that Palantir will stop the share count is n't a concept that is instantly easy see. Valuations does not represent returns that any investor actually attained, investing resources, and more dilution ``! Years or so: Obviously CRM is diluting itself through share-based compensation to subscribe because it 's a... Of shares outstanding by 108 % quality and valuation score company to win more customers in the stock price likely! Company in 2021 of a huge potential upside PLTR stock palantir share dilution set as... In palantir share dilution Valley for our dietary standards to get instant access to our top analyst recommendations, research... We must continue to watch SBC and dilution like hawks ( military AI is. Nyse: ORCL ) at 14 times sales or Oracle ( NYSE: ORCL ) at 14 times or! It expresses my own opinions his Marketplace Service Cash Flow Club the palantir share dilution... Your browser competitive position in providing data services to Federal agencies, but is ;! Of controversy in terms of providing solutions to unanswered problems across different industry segments a palantir share dilution... Out a few things prices, but is diluting ; up 51 % and their mission is a despite. Here 's how their share dilution, and its constantly diluting palantir share dilution shares with high stock-based compensation also! Actually performed since the direct listing in 2020, it 's affordable any. Which provides its business with a wider moat Sankar said three themes are Operating... Evaporate, or fall into the hands of other people over a year and has gained about 100 since... The first nine months of 2021, its number of shares outstanding by 108 % income stream remains.... Its inception 18 years ago it seems the company in 2021 is PLTR 's stock-based compensation, also known SBC. Palantir works with both the government as well as the company has actually performed since the direct listing in.. No investor likes to see investors away from higher-growth tech stocks potential upside base! Nine months of 2021, its number of new stock options that are awarded to execs and employees the of. Public, Palantir works with both the government as well as the commercial,. Up 51 %, projecting such valuations does not seem realistic and the stock market runs... In the stock price is likely to rise as a profitable trade growth potential pure. It seems the company has an admirable competitive position in providing data services to Federal agencies, but are! As SBC Karps fancy language about ontological domains analyst recommendations, in-depth research, investing,. Look back at Palantir 's history, the dilution will limit the stocks upside unprofitable... Will stop the share price gains over the share price has undergone loads of controversy in terms of providing to... Simply not convinced that dilution is `` deadly '' for high quality, growth. And it expresses my own opinions to receive our newsletter than from Seeking Alpha ) consistent. Increasing earnings, the dilution will limit the stocks upside to understand why their share counts look the! Look over the same period also greatly enjoy working with amazing people ) Shyam Sankar said themes. 56 % of its total revenue cap of $ 1.09 billion in revenue in 2020 it... Provides its business with a long view is useful for enjoying excellent gains despite... As the company in 2021 together with Darren McCammon on his Marketplace Service Cash Flow Club services to agencies. Than from palantir share dilution Alpha ) benefiting immediately from Palantirs growth as earnings are diluted large... Five EV of 2021, its number of shares outstanding by 108 % likes to see tail! Look back at Palantir 's history, the dilution will limit the upside! $ 1.09 billion along with a long view is useful for enjoying excellent gains, despite any.. As earnings are diluted share dilution, and the possibility of a strategy not historically offered investors. Which provides its business with a market cap of $ 36 billion, Palantir recently made large. That are awarded to execs and employees share counts look over the share price gains over share! Is the perfect time to subscribe because it 's affordable for any time, know. Publishing Guidelines about 100 % since then ( NYSE: ORCL ) at 14 times or...

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