Palantir's stock was trading about 6.3% lower at $22.73 per share on Wednesday at the time of publication. WebTo give you an idea of how many shares were covered under the 2010 Plan, this is from the S-1 (emphasis mine): As of June 30, 2020, options to purchase 308,905,744 shares of Certain assumptions have been made for modeling purposes and are unlikely to be realized. Turning to Wall Street, PLTR stock has a Moderate Sell consensus rating. Palantir Might Be Worth the Buy for Patient Investors. I am an investor, entrepreneur, father, husband, coach and teacher. 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. 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). Here's some color: The company appears to favour SBC over salary for all its employees, and thanks to the direct listing in 2020, the stock-based compensation expense increased five-fold from $241m in 2019 to $1.2bn in 2020. In fact, based on the companys FCF projections. If that holds true for 2021, that puts it at approximately $473 million for the year and $174 million in the most recent quarter. Thecompanys targetof generating more than 30% sales growth annually gives ammo to its high price-to-sales ratio. Third, its growth in healthcare is rising. Palantirs adjusted free cash flow margin of 29% is also an impressive achievement. If we look forward, analysts expect the company to stay unprofitable for at least the next two years. TipRanks is a comprehensive research tool that helps investors make better, data-driven investment decisions. The company is an unquestioned leader in the field of big data analytics. Furthermore, significant share dilution has passed and should not be a problem as the company advances. If you have an ad-blocker enabled you may be blocked from proceeding. We believe there are no alternatives that can compete on cost, speed, and performance.. Share-based compensation expenses have declined in recent quarters, which is in line with what one would expect from the above chart. EV/EBITDA multiple method is derived by taking public comparables across (1) systems integrators, (2) high growth Software as a Service (SaaS) companies, and (3) data mining and visualization companies across different industry verticals (Fig 5). SBC and share dilution are annoying. *Average returns of all recommendations since inception. Now that shares are down slightly, Palantir is a stock to consider again. 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. It has a powerful A.I. Palantirs government business revenue grew by 77%. A new tech publication by Start it up (https://medium.com/swlh). 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. Google. And the companys overall revenue was up 36% YOY at $392 million. One of, if not THE most heavily compensated CEO of any US company in 2021. Palantir's stock is also down by 84% from its all-time 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. 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. I'm simply not convinced that dilution is "deadly" for high quality, high growth companies with a long time horizon. Without incorporating the effects of dilution, any fair value automatically becomes inaccurate aka useless- and we risk thinking that a $81 fair value per share for Palantir would be reasonable. But as I sit here today, the bullish case is gaining momentum and making PLTR stock look like an attractive buying opportunity. Investors can thus not expect that Palantir will stop the share count dilution completely any time soon. However, the stock market did not seem to reciprocate such good news and instead, Palantir has dropped ~15% from US$ 26.75 to US$22.83 as of 15th Nov 2021. Just as it looked as though Palantir Technologies (NYSE:PLTR) would rally again, its quarterly earnings rained on its parade. 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. The information is not intended to be used as the basis of any investment decision by a person or entity. Despite these weaknesses, I remain bullish on Palantirs future. As long as management grows the company faster than it dilutes shareholders, the stock will outperform the index. SHARE THIS POST Palantir has several positives that aren't even disputed by most bulls, e.g. 1125 N. Charles St, Baltimore, MD 21201. Does it make it a bad investment? Within the first nine months of 2021, the companys number of weighted average shares has increased by 165% year-over-year. 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. And the companys overall revenue was up 36% YOY at $392 million. I noticed that their outstanding shares/market cap has been rapidly going up/diluting since. As for me, I have to admit that PLTR stock is starting to look a lot more attractive at this price. Palantir Technologies Inc. stock rises Monday, outperforms market Jan. 9, 2023 at 5:18 p.m. History suggests that SBC isn't a stock price killer. The Investment Community where "Cash Flow is King". MULN Stock Alert: Does Mullen Have 3,000 Preorders For Its FIVE EV? 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. I'll have to review this more closely in a future article. Palantir can implement solutions quickly. And when you join, I'll instantly share my actively managed growth stock portfolio. 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. Insider sales are hurting shareholders. government.". 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%. Today, Palantir trades at $22, for a $42 billion market capitalization. Someone else is enjoying the rewards. Please. 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. I think it's useful to inspect the narratives. I am the founder of Growth Stock Renegade, a premium service on Seeking Alpha's Market Place. These contracts accounted for approximately 56% of the companys revenue in the third quarter. This is somewhat difficult for some investors to remember. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. But over the long term, I still expect Palantir to leverage its battle-hardened reputation to secure more government clients and expand its enterprise business. All rights reserved. Strong deal value, growing 50% to $3.6 billion, signals strong business ahead. 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. Join today for less than $2 per day. 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. What did investors not like about Palantirs third-quarter results? In turn, banks will respond by strengthening their compliance programs. However, this secretive software firm that counts the CIA and FBI among its list of eminent clients has been quite a volatile and polarizing investment option since its listing. Raytheon Backtested results are calculated by the retroactive application of a model constructed on the basis of historical data and based on assumptions integral to the model which may or may not be testable and are subject to losses. Buyer Beware! Palantir, however, is still relatively small compared to these giants, and the company is way less profitable. 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. Backtested performance is developed with the benefit of hindsight and has inherent limitations. Once again, let's see how all this compares to share price gains over the same period of time. (Cognitive Computing) The company is an unquestioned leader in the field of big data analytics. (3)A quick transition into selling modular solution so that they are able to stack SaaS pricing and onboard more customers that arent willing to fork out a huge initial amount for the companys solutions. Both PYPL and ADBE were "cannibals" and appreciated over 600%. 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). 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. Please note all regulatory considerations regarding the presentation of fees must be taken into account. ET. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Investors are not benefiting immediately from Palantirs growth as earnings are diluted. for Palantir. 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. Stocks tumble, Apple slides as China COVID protests spook investors to start week The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. quotes delayed at least 15 minutes, all others at least 20 minutes. Thankfully for them, government contracts last many years. 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. 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). That's why it's often far better to look at it over a period of time. Palantir strikes me as a company thats not necessarily going to do what investors expect. The average price target, based on analysts, is $22.60. This poses a question; Is the market mispricing Palantirs growth story or has the market priced in additional setbacks of Palantir such as huge dilution in Palantirs stock-based compensation, a low probability to suppress its margins as the company seeks to expand and increase its top line revenue growth, and most importantly, the inability to consistently hit its 30% y-o-y revenue growth target? That's the point. Its balance sheet thus looks pretty strong, with cash clearly outsizing any debt. First, the company is growing its commercial revenue. 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. Last but not least, the share price gets influenced positively thanks to the impact on the supply-demand situation of shares on the market. 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. WebPalantir Technologies Inc. (PLTR) NYSE - NYSE Delayed Price. Stock Based Compensation: The Dilution Potential Of The Worst Offenders 7:01PM ET 1/15/2023 Seeking Alpha. 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). 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. So I just looked into PLTR sec filings to understand why their share dilution has been so significant. And, it's also a powerful recruiting and retention tool. Palantir had a share price of $30. As the company relies heavily on stock-based compensation, its number of weighted average shares has been rapidly increasing over the period. Palantir generates just over half of its revenue from government contracts. Changes in these assumptions may have a material impact on the backtested returns presented. 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. It's fair to say that I am one of the biggest Palantir (NYSE:PLTR) bulls on Seeking Alpha. Firstly, compensation via stock is a great way to incentivize employees through ownership of what they create. According to Tipranks, Jonathan is among the top 0.5% of bloggers (as of January 10, 2022: https://www.tipranks.com/bloggers/jonathan-weber). Its opportunities include leveraging its anti-money laundering and know-your-customer expertise. Interestingly, share count isn't a concept that is instantly easy to see. It also announced it would accept payment in Bitcoin (CCC:BTC-USD), although according to a company spokeswoman, Palantir has not received any payments in the cryptocurrency. Investors can thus not expect that Palantir will stop the share count dilution completely any time soon. I hope to see you inside Growth Stock Renegade. 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. Proven research methods championed by growth stock investors like Peter Lynch, Richard Koch, and Phil Fisher. Intuitively, we don't like it, but it's hard to see at a glance. Thus, this seeks to explain why Palantir is experiencing a downward pressure in its share price since its recent high of ~US$2628/share. 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). With good data and the right technology, people and institutions today can still solve hard problems and change the world for the better. Palantir scores a 41/100 on quality. That growth, combined with strong margins and cash flow, ought to translate to share price gains despite the friction and grind. its strong growth and its great position in its industry. Palantir has been operating for the past two decades and has been helping organizations undertake accurate data-driven decisions. 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. As mentioned above, other tech companies, including FB, GOOG, and Apple (AAPL) have done so, too, and had success with that. Palantir stock has been heavily diluted since it went public in a 2020 direct listing. Palantir Technologies (PLTR) has been trading publicly for a little over a year and has gained about 100% since then. I suspect you are quite familiar with Microsoft (MSFT), Amazon (AMZN), Facebook (FB) and Alphabet (GOOGL). It should also benefit from the growing need for real-time data, and remain a top play on the expanding AI market. Overall, PLTR remains a stock I like, despite its high valuation, mainly due to its strong moat and multi-decade growth runway. WACC (Fig 4) is estimated at 8.5% for Palantir. 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). Since going public as a direct listing in 2020, Palantir (NYSE:PLTR) has been a polarizing stock. And, that's why I emphasized adjusted numbers in Palantir: The Rule Of 40. In the quarter, Palantir added 34 new customers and closed 54 deals worth $1 million or more. 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. In a recent article I wrote on the stock, I estimated PLTR's 10-year return potential at 10%+ a year. 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. As costs fall and revenues rise, its quality score will improve. Palantirs customers in healthcare and government may potentially expand their technology spending budgets. Is This an Income Stream Which Induces Fear? Price as of January 18, 2023, 1:25 p.m. Another argument made against Palantir is that its share-based compensation hurts investors a lot. Disclosure: I/we have a beneficial long position in the shares of PLTR, FB, GOOG either through stock ownership, options, or other derivatives. Since then, it has fallen to trade at $18-$19 levels. 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. 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 Palantirs historical numbers are consolidated from FY18 to FY20 and projections are conducted from FY21 to FY27. In total, it received $610 million which accounts for 56% of its total revenue. has been a polarizing stock. Theres likely a few reasons for Palantir to favour SBC over salary. Quarterly Results SEC Filings / Governance. At this point, I've written well over 20 articles on the company. 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. Value investors could buy Microsoft (NASDAQ:MSFT) at 14 times sales or Oracle (NYSE:ORCL) at 6.8 times. A 5% terminal growth is set, due to how nascent the industry landscape is and the enterprise AI domain possesses a large market opportunity. Second, their market cap is $45B not 14.5, which already takes into account the locked shares. 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. If Palantir was growing its government side of the business at the exclusion of its commercial side, it would be concerning. Karp: Look were part of the group that was ridiculed in Silicon Valley for our dietary standards. Please. Overall, we can say that Palantir is solidly financed for sure, thanks to a $2+ billion net cash position and positive cash flows. It also announced it would accept payment in. I believe this is why PLTR leadership strongly emphasizes non-GAAP earnings. 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%. they should be getting. Research that delivers an independent perspective, consistent methodology and actionable insight, 2023 TV Show Cancellations- Effective Immediately. This sounded like a huge red flag, but gave benefit of doubt since they've been private for so long. Furthermore, PLTR has a narrative to maintain. Palantir is a high-growth company that operates worldwide in both commercial and government segments. , Palantir recently made a large purchase of gold bars. 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. Of particular concern was the approximately 17.2 million options that were still being held by Palantir CEO Alex Karp as of Sept. 30. On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The company gathers and organizes data from disparate sources to help its clients make data-driven decisions. Chris Lauis acontributing author for InvestorPlace.com and numerous other financial sites. Hence, projecting such valuations does not seem realistic and the base cases outcome is recommended. It soared from $9-$10 levels in September 2020 (when it debuted on the exchanges) to $45 by January 2021. He has been writing for InvestorPlace since 2019. But they did start to opt for share repurchases eventually, seeing that this provides ample tailwinds both for EPS growth, which will make each individual share more valuable. Moreover, the company is also focusing on accelerating its business, especially across the commercial front, with its second software solution,Foundry. This is pretty insane, I had no idea. But its hard to find fault when the company is growing both sides of the business. If a stock has dropped to a 52-week low, I'd like to see its insiders buy more shares than they're selling to consider it a potential turnaround play. 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. 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. 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. 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. 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%. Go to company page The cost of equity is calculated with the CAPM formula, reflecting USAs equity risk premium, risk-free rate, and Palantirs historical 1 year Beta. Nevertheless, PLTR is forecasted to grow like crazy as I've already demonstrated above. This suggests the stock has no near-term upside. 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. How Rare Are Sanpaku Eyes, Sadie Stanley Julia Stiles, Gatorade Player Of The Year 2022 Nominees, Advantages And Disadvantages Of Tyler's Model Of Curriculum Development Pdf, Outgoing Commander Change Of Command Speech Samples, Articles P
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