Second, their market cap is $45B not 14.5, which already takes into account the locked shares. Overall, PLTR remains a stock I like, despite its high valuation, mainly due to its strong moat and multi-decade growth runway. 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. Google. Theres likely a few reasons for Palantir to favour SBC over salary. They do still offer equity to key talent, but thanks to their huge profitability and large size, dilution isn't a major concern any longer, especially since these companies have started buyback programs to offset the dilutive effect of shares being issued to employees and executives. Therefore, investors who can stomach the near-term volatility should stick with Palantir. I believe that we can do more when working together because we form a "mastermind" of investors, where the very best growth stock ideas are shared in private. 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. And I saw that as of end of 2020, they had 1.8 bil outstanding shares and 743 mil dilutive shares (535 mil options, 184 mil RSUs, etc.) The forecasted annual earnings growth over the next year is 67% (which Perhaps I'm wrong here but to my eyes there's not an obvious correlation between share count and capital gains over 10 years. 5 Hypergrowth Stocks With 10X Potential in 2023. Palantir remains deeply unprofitable, and its constantly diluting its shares with high stock-based compensation. No representations and warranties are made as to the reasonableness of the assumptions. Now, let's ignore share count just for a moment. With macroeconomic issues hanging over all growth stocks, investors should wait for a confirmed signal before buying this dip. Making the world smarter, happier, and richer. Eng, Go to company page However, I need to point out a few things. This is on the low side because of the weak return on invested capital. 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. 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. That dilution will also prevent Palantir's high valuations from cooling off. Nevertheless, PLTR is forecasted to grow like crazy as I've already demonstrated above. 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. 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. ), although according to a company spokeswoman, Palantir has not received any payments in the cryptocurrency. We have war fighters who follow our nutrition. Despite the long To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. The profusion of opinions on social media and financial blogs makes it impossible to distinguish between real growth potential and pure hype. 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). 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. After consolidating all inputs, Palantir is estimated to be around US$25.22 per share via EBITDA multiple method and US$24.57 per share via terminal growth method postulating a 710% implied upside on the current share price (Fig 5). I appreciate your feedback, comments and questions. I work together with Darren McCammon on his Marketplace Service Cash Flow Club. So been balls deep in Palantir since it went public in September. 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. Hence, projecting such valuations does not seem realistic and the base cases outcome is recommended. Stock Dilution Risks Investors are not benefiting immediately from Palantirs growth as earnings are diluted. Currency in USD Follow 2W 10W 9M 6.96 -0.05 (-0.71%) At close: January 13 04:00PM EST 6.94 -0.02 (-0.29%) To put this in focus another way, consider how strongly PLTR has actually performed since the direct listing in 2020. Quarterly Results SEC Filings / Governance. 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. Cornerstone, Go to company page It appears to me that PLTR's growth will overcome the SBC problem over the coming years. Facebook (FB) or Alphabet (GOOG) (GOOGL) when they were smaller. On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. 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%. Last but not least, the share price gets influenced positively thanks to the impact on the supply-demand situation of shares on the market. 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. 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 Its CEO, for example, received a massive $1.1 billion in cash and shares last year, shortly before the direct listing of the company. The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. 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%. Palantir SBC is costly and is here to stay, therefore must be incorporated into a financial valuation. It has a powerful A.I. What did investors not like about Palantirs third-quarter results? 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. Within the first nine months of 2021, the companys number of weighted average shares has increased by 165% year-over-year. Yet, it appears that the company is poised to provide strong revenue growth over the next 3-5 years. 1125 N. Charles St, Baltimore, MD 21201. Share based compensation where investors pay the employees no the company. So today, I'll take a look at five red flags that might limit Palantir's near-term gains. Analyst Report: Palantir Technologies Inc. NYSE - Nasdaq Real Time Price. 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. Palantir's stock is also down by 84% from its all-time 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. Buyer Beware! government.". InvestorPlace - Stock Market News, Stock Advice & Trading Tips. 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 has never been a profitable companysince its inception. Someone else is enjoying the rewards. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. The U.S. Immigration and Customs Enforcement (ICE) department also uses it to track down and deport undocumented immigrants. 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. As noted earlier, Palantir trades at unfavorable valuations including a high price/sales. Subscribe right now because you get 14 days for FREE. And the companys overall revenue was up 36% YOY at $392 million. The big picture is that share count is a hot button issue. Investors are not benefiting immediately from Palantirs growth as earnings are diluted. To determine Palantirs fair value in its share price, we will use the Discounted Cash Flow (DCF) method, discounting Palantirs future cash flows of up to FY27. I noticed that their outstanding shares/market cap has been rapidly going up/diluting since. Palantir generated $1.09 billion in revenue in 2020, but it posted a whopping net loss of $1.17 billion. Financial Market Data powered by FinancialContent Services, Inc. All rights reserved. I am bullish on PLTR stock. Turning to Wall Street, PLTR stock has a Moderate Sell consensus rating. Certain assumptions have been made for modeling purposes and are unlikely to be realized. On the other, bears are not wrong to criticize Palantir's cash-burning problem and excessive stock-based compensation, which keeps diluting shareholders to oblivion. Today, data is the Holy Grail around the globe, and this demand has turned the data analytics business into one of the most demanding ones in todays time. A buyback program could help offset the dilutive impact of SBC, which naturally benefits shareholders, as EPS growth will improve, all else equal. First, it is seeing more traction with the defense industrial customer. And, it's also a powerful recruiting and retention tool. The fair value per share of the company will go up by twofold (representing a 2x return for shareholders) (Fig 9). 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. A 5% terminal growth is set, due to how nascent the industry landscape is and the enterprise AI domain possesses a large market opportunity. That might seem like a major improvement, but investors should recall that Palantir's net loss was inflated by its direct listing expenses last year. Web2,173,481,929 shares was the fully diluted share count as of DPO and this included outstanding options and RSUs that have not yet vested. A new tech publication by Start it up (https://medium.com/swlh). Not surprisingly, Karp has sold a lot of these options recently. Of course, revenue growth of 30% for the next several years is impressive. Nevertheless, in 12 months, it's beaten some of the world's best companies. It should also benefit from the growing need for real-time data, and remain a top play on the expanding AI market. That's the point. Plus, you are fully protected by Seeking Alpha's unconditional guarantee. Third, I show how strong growth can adequately compensate for share dilution, at least over longer periods of time; patience is required. An adjusted free cash flow (FCF) of $119 million in the last quarter and a margin of 30% is hard to ignore. WACC (Fig 4) is estimated at 8.5% for Palantir. 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. 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. It also announced it would accept payment in. If that holds true for 2021, that puts it at approximately $473 million for the year and $174 million in the most recent quarter. Down 67% in 2022, Is Palantir Stock a Buy for 2023? Is this happening to you frequently? Chris Lauis acontributing author for InvestorPlace.com and numerous other financial sites. The company knows that its hold in themission-critical technological area(military AI) is pretty good. Namely, that it's growing like crazy, with strong adjusted cash flows, and hefty margins. It's still a major thorn in my side. At an annualized $1.57 billion and a $45.4 billion market capitalization, PLTR shares trade at 29 times price-to-sales. 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. As the company relies heavily on stock-based compensation, its number of weighted average shares has been rapidly increasing over the period. If history repeats itself, then PLTR stock could set up as a profitable trade. Price as of January 18, 2023, 1:25 p.m. Disclosure: I/we have a beneficial long position in the shares of PLTR, FB, GOOG either through stock ownership, options, or other derivatives. 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). 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! Its a perfectly legal practice, its just not something investors like to see. 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. I do much more than just articles at Cash Flow Kingdom: Members get access to model portfolios, regular updates, a chat room, and more. Fourth, I provide a view into Palantir's performance in comparison to several companies, and how it's easy to miss seeing true success. Its stock remains expensive relative to its sales, . And, that's also in line with PLTR's long-term sales view, back from Q4 2020. He has been writing for InvestorPlace since 2019. 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%. When employees start to exercise these rights, (1) future dilution and (2) decreased free cash flow will occur, slashing the fair value per share to a lower price. The company works closely with the U.S. Army and the Department of Defense (DoD). 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. Go to company page Please. Stock Prodigy Who Found NIO at $2 Says Buy THIS Now, Man Who Called Black Monday: Prepare Now.. To make the world smarter, happier, and richer. I am not receiving compensation for it (other than from Seeking Alpha). 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. Could Palantir Become the Next Salesforce? In the last quarter, Palantir reported a. in commercial revenue. Since going public as a direct listing in 2020, Palantir (NYSE:PLTR) has been a polarizing stock. Palantir has a strong moat that gives customers an edge. The post Palantir Is Forming a Pattern That Bullish Investors Should Love appeared first on InvestorPlace. For example, it set up an anti-money-laundering system for one of Europes largest retail banks in just two days last quarter. 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. If history repeats itself, then PLTR stock could set up as a profitable trade. Disclosure: At the time of publication, Hashtag Investing did not have a position in any of the securities mentioned in this article. Backtested performance is developed with the benefit of hindsight and has inherent limitations. Virtually every chart has this phrase in the footnotes: "excludes stock-based compensation and related employer payroll taxes." 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. 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. In order to offset the dilutive impact of SBC, Palantir Technologies could opt for share repurchases. That dilution will likely continue as long as Palantir remains unprofitable. The real question isn't compensation but dilution and share count. Thanks for pointing this out. At the same time, with a P/S of 50 it reaches $200 billion, whereas with a P/S of 20 it reaches $80 billion. 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. Start your free two-week trial today! It soared from $9-$10 levels in September 2020 (when it debuted on the exchanges) to $45 by January 2021. 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. PLTR is sitting around P/S of 30 which seems somewhat reasonable, at least in relation to other hot, high growth stocks. Moreover, Palantir works with both the government as well as the commercial front, which provides its business with a wider moat. Palantir had a share price of $30. ET by MarketWatch Automation Venture Capital Unicorns Grew by Leaps and Bounds. 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. Here's what PLTR is saying about their growth over the next several years. Breaking News Nov 28, 2022. These options were set to expire on Dec. 3, 2021. 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. 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. Backin 2020,it had generated a revenue of $1.09 billion along with a net loss of $1.17 billion. Gross margins are stronger than the S&P 500 average. Certainly, that's a view in the rearview mirror. AMZN's share count was up 12% but price was up 1.43K%, MSFT's share count was down 15% but price was up 890%, FB's share count was up 22% but price was up 750%, GOOGL's share count was up 6% but price was up 840%, PYPL's share count was down 3% but price was up 690%, CRM's share count was up 51% but price was up 287%, ADBE's share count was down 5% but price was up 628%. That growth, combined with strong margins and cash flow, ought to translate to share price gains despite the friction and grind. 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. The same was true for many other companies in a similar position, e.g. Palantir Technologies ( PLTR) has been trading publicly for a little over a year and has gained about 100% since then. According to Tipranks, Jonathan is among the top 0.5% of bloggers (as of January 10, 2022: https://www.tipranks.com/bloggers/jonathan-weber). The Upside Potential for SOFI Stock Is Limited. Palantir expects revenue will grow by 40% to $1.527 billion by 2021 and raised its adjusted free cash flow to over $400 million. See for yourself. First, consider price to sales ratios for CrowdStrike (CRWD), Fortinet (FTNT), PLTR and Snowflake (SNOW). That's why it's often far better to look at it over a period of time. Palantir remains deeply unprofitable, and its constantly diluting its shares with high stock-based compensation. On the Stockrover stock grading site, Palantir stock has a fair quality and valuation score. Palantirs share price has undergone loads of controversy in terms of the forecasted direction and the possibility of a huge potential upside. Louis Navellier and the InvestorPlace Research Staff. Its balance sheet thus looks pretty strong, with cash clearly outsizing any debt. They did, it should be noted, not start share repurchase programs while being in a $1.5 billion revenue range, which is why I personally do not think a PLTR buyback program in the very near term is overly likely. Palantir is, I believe, very well positioned from a tech perspective, the company has a wide moat, is well-connected to customers in both the government sector and the private sector, and PLTR is active in an absolute growth market. 2023 InvestorPlace Media, LLC. WebPalantir Technologies Inc. (PLTR) closed at $7.01 in the latest trading session, marking a +0.43% move from the prior day. Is This an Income Stream Which Induces Fear? PLTR stock already tripled since its initial public offering. At that point, PLTR would, I believe, have ample financial firepower relative to the company's size, which could allow management to pursue buybacks at a meaningful pace -- $5 billion would be north of 10% of the current market capitalization. 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. 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). For the first three quarters of 2021, the company has revenue that exceeds $1.1 billion. Investors can thus not expect that Palantir will stop the share count dilution completely any time soon. These contracts accounted for approximately 56% of the companys revenue in the third quarter. Palantir scores a 41/100 on quality. 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. 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. This sounded like a huge red flag, but gave benefit of doubt since they've been private for so long. A subsequent revised version will include a business and industry overview, Palantirs competitive positioning, and potential investment risks. 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). I am not receiving compensation for it (other than from Seeking Alpha). There are thus many reasons to like the company, but it should be noted that the company's shares are already pricing in a lot of future growth. Uber, Lucky you got in in September. We believe there are no alternatives that can compete on cost, speed, and performance.. 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. 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. In the Q3 2021 earnings conference call on Nov.9, he said, legacy compliance solutions are often 2 or more decades behind. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. Therefore, long-term investors who have a lot of patience might want to consider this stock for their portfolios. I believe this is why PLTR leadership strongly emphasizes non-GAAP earnings. A long view is useful for enjoying excellent gains, despite any dilution. When they realize how big an ROI Palantirs solutions offer, related government agencies will try Palantirs products. Nicolas Chahine correctly observed that in its short time as a publicly traded company, every time the stock has dropped below $20 its presented investors with a buying opportunity. I have no business relationship with any company whose stock is mentioned in this article. exercisable in time.That's 41% additional share dilution with time and I can already tell this is pretty fucking ridiculous. I hope to see you inside Growth Stock Renegade. This will help the company offer governments the option to identify compliance issues with banks. 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. Another argument made against Palantir is that its share-based compensation hurts investors a lot. Palantir specializes in big data analytics. Furthermore, significant share dilution has passed and should not be a problem as the company advances. Lets take a look at their Government and Commercial business. 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. SBC and share dilution are annoying. Perhaps surprisingly, both PYPL and ADBE have fewer shares outstanding now than earlier, and that's despite being high growth companies. 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. Today, Palantir trades at $22, for a $42 billion market capitalization. Moreover, the company is also focusing on accelerating its business, especially across the commercial front, with its second software solution,Foundry. He shares his stock picks so readers get original insight that helps improve investment returns. 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. 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. MULN Stock Alert: Why Are Investors Suing Mullen Automotive? One way to reduce the impact of SBC would be to lower issuance, i.e. Today, Palantir trades at $22, for a $42 billion market capitalization. The future looks bright. It's my #1 issue with PLTR. 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. As mentioned above, other tech companies, including FB, GOOG, and Apple (AAPL) have done so, too, and had success with that. The amount of drag is dictated by a combination of dilution and growth. The Investment Community where "Cash Flow is King". As long as management grows the company faster than it dilutes shareholders, the stock will outperform the index. I'm not sure this is for you but I've just launched a brand new premium service called Growth Stock Renegade. It is said that back in 2011, the U.S. Army had reportedly used Gotham to track down Osama Bin Laden. It'll work out. This is pretty insane, I had no idea. 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. 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. 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. Palantirs government business revenue grew by 77%. In the last quarter, Palantir reported a 37% year-over-year (YOY) increase in commercial revenue.

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