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. One out of eight analysts have given Palantir a Buy rating, three have Hold ratings, and the remaining four have suggested a Sell. Just as it looked as though Palantir Technologies (NYSE:PLTR) would rally again, its quarterly earnings rained on its parade. With good data and the right technology, people and institutions today can still solve hard problems and change the world for the better. The company is an unquestioned leader in the field of big data analytics. Palantir's number of weighted-average shares rose 70% year over year at the end of 2020 following its direct listing. Thecompanys targetof generating more than 30% sales growth annually gives ammo to its high price-to-sales ratio. These options were set to expire on Dec. 3, 2021. We must continue to watch SBC and dilution like hawks. 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. Quarterly Results SEC Filings / Governance. As mentioned above, other tech companies, including FB, GOOG, and Apple (AAPL) have done so, too, and had success with that. 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. I/we have a beneficial long position in the shares of PLTR, FB, GOOG either through stock ownership, options, or other derivatives. At 150x forward earnings, and at around 30x net revenues, PLTR is far from a cheap stock. 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. Theres likely a few reasons for Palantir to favour SBC over salary. Palantir stock has been heavily diluted since it went public in a 2020 direct listing. from when they initially went public and their dilution ranged from 10-20% (most in the low 10s).What does this mean? So I just looked into PLTR sec filings to understand why their share dilution has been so significant. 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. In fact, based on the companys FCF projections. The company is an unquestioned leader in the field of big data analytics. Analyst Report: Palantir Technologies Inc. NYSE - Nasdaq Real Time Price. Within the first nine months of 2021, the companys number of weighted average shares has increased by 165% year-over-year. Value investors could buy Microsoft (NASDAQ:MSFT) at 14 times sales or Oracle (NYSE:ORCL) at 6.8 times. Financials. He has been writing for InvestorPlace since 2019. If that holds true for 2021, that puts it at approximately $473 million for the year and $174 million in the most recent quarter. However, it seems the company has now been dedicating itself to finally improving its bottom-line performance. Let's use the same basic approach to look at three more companies. We believe there are no alternatives that can compete on cost, speed, and performance.. This is AMC / GameStop levels of dilution. I am not receiving compensation for it (other than from Seeking Alpha). 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. PLTR stock already tripled since its initial public offering. A new tech publication by Start it up (https://medium.com/swlh). It has a powerful A.I. TipRanks is a comprehensive research tool that helps investors make better, data-driven investment decisions. 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. One of, if not THE most heavily compensated CEO of any US company in 2021. Governance Documents Executive Management Board of Directors Committee Composition / Resources. Price as of January 18, 2023, 1:25 p.m. Current and future investors will have to keep track of Palantirs future quarterly financial reports to determine the potential of the company. A long view is useful for enjoying excellent gains, despite any dilution. Article printed from InvestorPlace Media, https://investorplace.com/2021/11/palantir-might-be-worth-the-buy-for-patient-investors/. Palantir Technologies (PLTR) has been trading publicly for a little over a year and has gained about 100% since then. 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. Dear MULN Stock Fans, Brace Yourself for a Reverse Stock Split. 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. The averagePalantir Technologies price targetof $23.14 implies 25.4% upside potential. Therefore, investors who can stomach the near-term volatility should stick with Palantir. 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. 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. He shares his stock picks so readers get original insight that helps improve investment returns. No investor likes to see value evaporate, or fall into the hands of other people. This is pretty insane, I had no idea. Please disable your ad-blocker and refresh. 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. If you have an ad-blocker enabled you may be blocked from proceeding. WebPalantir Technologies Inc. (PLTR) closed at $7.01 in the latest trading session, marking a +0.43% move from the prior day. First, as I've roughly demonstrated above, share count can go up or down, yet investors can still do quite well. That's the point. following me for any time, you know that one of biggest concerns is PLTR's stock-based compensation, also known as SBC. 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. Please. All of this is to make an even more important point today. The information is not intended to be used as the basis of any investment decision by a person or entity. 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. quotes delayed at least 15 minutes, all others at least 20 minutes. Of particular concern was the approximately 17.2 million options that were still being held by Palantir CEO Alex Karp as of Sept. 30. 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. 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%. 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). Palantirs share price has undergone loads of controversy in terms of the forecasted direction and the possibility of a huge potential upside. Financial Market Data powered by FinancialContent Services, Inc. All rights reserved. Nevertheless, in 12 months, it's beaten some of the world's best companies. Palantir generated $1.09 billion in revenue in 2020, but it posted a whopping net loss of $1.17 billion. Second, their market cap is $45B not 14.5, which already takes into account the locked shares. 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 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. Third, its growth in healthcare is rising. I am not receiving compensation for it (other than from Seeking Alpha). SHARE THIS POST 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. Palantir can implement solutions quickly. Third, I show how strong growth can adequately compensate for share dilution, at least over longer periods of time; patience is required. MSFT is the only "cannibal" of this bunch. Palantir, which builds data analysis software for government agencies and large corporations, said on Monday that it has 2.17 billion diluted shares. In order to offset the dilutive impact of SBC, Palantir Technologies could opt for share repurchases. 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. for Palantir. For the first three quarters of 2021, the company has revenue that exceeds $1.1 billion. But this is a statistic that requires context. In the last quarter, Palantir reported a 37% year-over-year (YOY) increase in commercial revenue. 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.. 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. Breaking News Nov 28, 2022. 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 has been operating for the past two decades and has been helping organizations undertake accurate data-driven decisions. 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. Backtested performance is developed with the benefit of hindsight and has inherent limitations. Specifically, backtested results do not reflect actual trading or the effect of material economic and market factors on the decision-making process. Within thefirst nine months of 2021, its revenue improved substantially by 44% to $1.11 billion and the net loss also narrowed down to $364 million from $1.02 billion. If we look forward, analysts expect the company to stay unprofitable for at least the next two years. Thus, the valuation result seeks to show why the stock has not soared as opposed to majority of the retail investors sentiments towards the company, with some even projecting a 510x return on the company within 25 years. 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. Subscribe right now because you get 14 days for FREE. 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. It should also benefit from the growing need for real-time data, and remain a top play on the expanding AI market. However, this secretive software firm that Stock Dilution Risks Investors are not benefiting immediately from Palantirs growth as earnings are diluted. I have no business relationship with any company whose stock is mentioned in this article. 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. Gross margins are stronger than the S&P 500 average. In FY2020, its revenue grew 47%. 7 Top-Rated Energy Stocks to Fill Up Your Portfolio. (See Analysts Top Stocks on TipRanks). 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. 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. its strong growth and its great position in its industry. I am the founder of Growth Stock Renegade, a premium service on Seeking Alpha's Market Place. News Events. For now, I'm allowing PLTR some room, given their strong value proposition, sticky products and of course their tremendous growth story. 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. In the last quarter, Palantir reported a. in commercial revenue. All rights reserved. Since going public as a direct listing in 2020, Palantir (NYSE:PLTR) has been a polarizing stock. Copyright 2023 InvestorPlace Media, LLC. The real question isn't compensation but dilution and share count. On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. Palantir worked exclusively for the U.S. Government previously and built a very strong relationship with it during that time. Second, I use several examples to show how share dilution is frustrating but not deadly for investors. Bulls will argue that the company is offering public and private sector clients a solution that will be invaluable in coming years. I have no business relationship with any company whose stock is mentioned in this article. In turn, banks will respond by strengthening their compliance programs. eBay, Go to company page Investors can thus not expect that Palantir will stop the share count dilution completely any time soon. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. As the company relies heavily on stock-based compensation, its number of weighted average shares has been rapidly increasing over the period. It'll work out. Lets take a look at their Government and Commercial business. First, I explain how stock-based compensation or "SBC" is my #1 complaint about Palantir. 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. So today, I'll take a look at five red flags that might limit Palantir's near-term gains. It ( other than from Seeking Alpha ) 2020, but it posted a whopping net loss of 1.17... In this article 37 % year-over-year built a very strong relationship with any company whose stock is in. From a cheap stock a top play on the decision-making process the founder of growth stock Renegade a! Been rapidly increasing over the period Karp as of Sept. 30 stock Split % since then said Monday... 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