On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The primary goal of the Cash Flow Kingdom Income Portfolio is to produce an overall yield in the 7% - 10% range. 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. Third, its growth in healthcare is rising. 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. We must not let PLTR off the hook. 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. Someone else is enjoying the rewards. On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. 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. Please. 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. At an annualized $1.57 billion and a $45.4 billion market capitalization, PLTR shares trade at 29 times price-to-sales. First, the company is growing its commercial revenue. 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. What did investors not like about Palantirs third-quarter results? Palantir is, I believe, not a low-risk pick, and one has to be willing to stomach the volatility and to hold shares for a long time to justify buying. Facebook (FB) or Alphabet (GOOG) (GOOGL) when they were smaller. Not really. 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. Nevertheless, in 12 months, it's beaten some of the world's best companies. Thankfully for them, government contracts last many years. Not surprisingly, Karp has sold a lot of these options recently. Since then, it has fallen to trade at $18-$19 levels. exercisable in time.That's 41% additional share dilution with time and I can already tell this is pretty fucking ridiculous. COO Sankar said that FinTech disruptors are ahead of traditional banks. 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. Palantir's stock is also down by 84% from its all-time One bearish argument against Palantir continues to be the companys reliance on government contracts. Palantir has customers in the mobility space that includes original equipment manufacturers (OEM), their suppliers, EV charging companies, and insurers. It's my #1 issue with PLTR. 5 Hypergrowth Stocks With 10X Potential in 2023. 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. Both PYPL and ADBE were "cannibals" and appreciated over 600%. Could Palantir Become the Next Salesforce? Palantir remains deeply unprofitable, and its constantly diluting its shares with high stock-based compensation. A buyback program could help offset the dilutive impact of SBC, which naturally benefits shareholders, as EPS growth will improve, all else equal. 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%. Secondly, its a non-cash expense, so Palantir doesnt technically have to outlay any cash to pay for these expenses, so its ability to generate cash flow from operations is not hindered and this would help the company to reinvest in itself. In fact, based on the companys FCF projections. Overall, we can say that Palantir is solidly financed for sure, thanks to a $2+ billion net cash position and positive cash flows. No representations and warranties are made as to the reasonableness of the assumptions. In turn, banks will respond by strengthening their compliance programs. As costs fall and revenues rise, its quality score will improve. I am an investor, entrepreneur, father, husband, coach and teacher. 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. There are also some issues that should not be neglected, however, such as Palantir's valuation and its high SBC. Banks may justify the return on investment (ROI) based only on the speed of the installation. Moreover, the company is also focusing on accelerating its business, especially across the commercial front, with its second software solution,Foundry. The company is an unquestioned leader in the field of big data analytics. Moreover, the company still has huge room for growth as its AI-powered data mining tools are not going to lose importance anytime soon. First, I explain how stock-based compensation or "SBC" is my #1 complaint about Palantir. Turning to Wall Street, PLTR stock has a Moderate Sell consensus rating. For example, Palantir is helping the National Health Service (NHS) analyze information for millions of patients. Palantir has been operating for the past two decades and has been helping organizations undertake accurate data-driven decisions. So been balls deep in Palantir since it went public in September. I have no business relationship with any company whose stock is mentioned in this article. Stocks tumble, Apple slides as China COVID protests spook investors to start week Palantir has been one of the worst-hit stocks since the growth meltdown began last year. 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. 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. On the other hand, CRM increased share count rather substantially and didn't quite make it over 300% price appreciation. 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. quotes delayed at least 15 minutes, all others at least 20 minutes. Is this happening to you frequently? 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. 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. Moreover, the high dilution has also been preventing Palantirs high valuations from cooling off. 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 faces a lot of challenges, and it could remain out of favor as inflation-related fears drive investors away from higher-growth tech stocks. Best-of-breed growth stock ideas targeting oversized returns. 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. I wrote this article myself, and it expresses my own opinions. MULN Stock Alert: Why Are Investors Suing Mullen Automotive? And when you join, I'll instantly share my actively managed growth stock portfolio. 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 There is, however, also another possibility. I/we have a beneficial long position in the shares of PLTR, FB, GOOG either through stock ownership, options, or other derivatives. I have no business relationship with any company whose stock is mentioned in this article. 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. The value score is 42/100. If we look forward, analysts expect the company to stay unprofitable for at least the next two years. I noticed that their outstanding shares/market cap has been rapidly going up/diluting since. So while there will likely continue to be some selling in the next few years, investors may have to find something else to object to. This is on the low side because of the weak return on invested capital. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Despite the long tail in revenue in the next few years increasing earnings, the dilution will limit the stocks upside. Someone else is enjoying the rewards. Palantir worked exclusively for the U.S. Government previously and built a very strong relationship with it during that time. Quarterly Results SEC Filings / Governance. See for yourself. 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.. That being said, I think it's still important for bullish investors to recognize Palantir's weaknesses. For the first three quarters of 2021, the company has revenue that exceeds $1.1 billion. Let's use the same basic approach to look at three more companies. 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. Once again, let's see how all this compares to share price gains over the same period of time. If you have an ad-blocker enabled you may be blocked from proceeding. The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. We must continue to watch SBC and dilution like hawks. Analyst Coverage Information Request Investor Email Alerts. 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. I appreciate your feedback, comments and questions. A buyback program could solve the SBC issue, but do not expect one in the very near term, despite the fact that PLTR's balance sheet is clean. Cornerstone, Go to company page As the industry landscape is largely unprofitable, forward EV/EBITDA multiples range in the high numbers from 60x to 200x companies are expected to have >50% y-o-y revenue growth with decreasing operating structures. 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. 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. eBay, Go to company page 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. government.". To put this in focus another way, consider how strongly PLTR has actually performed since the direct listing in 2020. Today, Palantir trades at $22, for a $42 billion market capitalization. The company knows that its hold in themission-critical technological area(military AI) is pretty good. 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. But this is a statistic that requires context. 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. Overall, PLTR remains a stock I like, despite its high valuation, mainly due to its strong moat and multi-decade growth runway. Since going public as a direct listing in 2020. ) I have also generated over $30 million in online sales through my own business activities, along with several million dollar producing partners and affiliates. But nevertheless, critics have an argument when they state that SBC expenses at Palantir are quite high and that this poses an issue for future total returns. There is, of course, no guarantee that this will happen, and execs may find other ways to spend the money. Palantir's number of weighted-average shares rose 70% year over year at the end of 2020 following its direct listing. 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. 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. 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). WACC (Fig 4) is estimated at 8.5% for Palantir. As long as management grows the company faster than it dilutes shareholders, the stock will outperform the index. And, as long as growth is far greater than dilution, everything should work out fine. Stock Based Compensation: The Dilution Potential Of The Worst Offenders 7:01PM ET 1/15/2023 Seeking Alpha. Backtested performance is not an indicator of future actual results. 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. Palantir shares slipped after posting Q3 results, as investors expected more. 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. 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 am not receiving compensation for it (other than from Seeking Alpha). *Average returns of all recommendations since inception. 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. 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. 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%. I noticed that their outstanding shares/market cap has been rapidly going up/diluting since. I'll come back to that $4 billion in revenue in a minute. PLTR is an attractive high-growth pick with a huge moat that is active in an industry that could grow for many years to come. Within the first nine months of 2021, the companys number of weighted average shares has increased by 165% year-over-year. Making the world smarter, happier, and richer. This is AMC / GameStop levels of dilution. 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?. 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). One out of eight analysts have given Palantir a Buy rating, three have Hold ratings, and the remaining four have suggested a Sell. Second, it's bad but not super bad for PLTR. 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. Palantir's stock was trading about 6.3% lower at $22.73 per share on Wednesday at the time of publication. Nicolas Chahine correctly observed that in its short time as a publicly traded company, every time the stock has dropped below $20 its. I am not receiving compensation for it (other than from Seeking Alpha). 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. Thecompanys targetof generating more than 30% sales growth annually gives ammo to its high price-to-sales ratio. Palantir chose a direct listing rather than a traditional offering, which means that the company did not raise funds for itself by selling shares. Instead, existing shareholders were able to sell and liquidate their shares on the open market. 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. First, the company is growing its commercial revenue. This sounded like a huge red flag, but gave benefit of doubt since they've been private for so long. From that standpoint, Palantirs future prospects make the dilution seem less intimidating. News Events. Palantir generates just over half of its revenue from government contracts. I am not receiving compensation for it (other than from Seeking Alpha). Chief Operating Officer (COO) Shyam Sankar said three themes are driving operating margins. Actual performance may differ significantly from backtested performance. 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 much more than just articles at Growth Stock Renegade: Members get access to model portfolios, regular updates, a chat room, and more. 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. Current and future investors will have to keep track of Palantirs future quarterly financial reports to determine the potential of the company. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Cost basis and return based on previous market day close. 7 Top-Rated Energy Stocks to Fill Up Your Portfolio. Disclosure: At the time of publication, Hashtag Investing did not have a position in any of the securities mentioned in this article. This information is provided for illustrative purposes only. The Motley Fool has a disclosure policy. In FY2020, its revenue grew 47%. This information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. 1125 N. Charles St, Baltimore, MD 21201. In the Q3 2021 earnings conference call on Nov.9, he said, legacy compliance solutions are often 2 or more decades behind. InvestorPlace - Stock Market News, Stock Advice & Trading Tips. In total, it received $610 million which accounts for 56% of its total revenue. Dear MULN Stock Fans, Brace Yourself for a Reverse Stock Split. contributing author for InvestorPlace.com and numerous other financial sites. Palantir can implement solutions quickly. Therefore, long-term investors who have a lot of patience might want to consider this stock for their portfolios. 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! Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. 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. 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 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). Right now is the perfect time to subscribe because it's affordable for any budget. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. 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. Virtually every chart has this phrase in the footnotes: "excludes stock-based compensation and related employer payroll taxes."

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