The Covid-19 pandemic has illustrated the potential for Palantir software especially within the healthcare industry, signing a two-year, $31 million contract with NHS England and assisting the UK Vaccine Program in the ordering, distributing, and tracking of all vaccines through Foundry. Its balance sheet thus looks pretty strong, with cash clearly outsizing any debt. Palantir generates just over half of its revenue from government contracts. Palantir SBC is costly and is here to stay, therefore must be incorporated into a financial valuation. Eng, Go to company page Palantirs government business revenue grew by 77%. He has been writing for InvestorPlace since 2019. Actual performance may differ significantly from backtested performance. Theres likely a few reasons for Palantir to favour SBC over salary. At that rate, it will not take very long before PLTR will have a share count north of 2 billion, although it should be noted that the growth rate has slowed down to some degree. The companys valuation could thus be well above $20 billion if public investors are willing to buy the shares where theyve traded most recently in the private market. Palantir is pursuing a direct listing rather than a traditional IPO, meaning its not raising capital and is instead allowing existing stakeholders to sell shares to new investors. The company is one of the most trusted analytics platforms for the U.S. government and its allies. 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. On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. Not surprisingly, Karp has sold a lot of these options recently. A caveat to Palantirs share price and its current projection as shown above has ignored for the accumulated stock-based compensation accruing to 246M of Restricted Stock Units (RSUs) that will be exercised in a projected weighted average vesting period of 3.2 years (166M current, 80M projected from 20222025). 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. 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. Buyer Beware! I wrote this article myself, and it expresses my own opinions. Today, Palantir trades at $22, for a $42 billion market capitalization. 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. 18 of those deals were valued at $10 million or more. At this point, I've written well over 20 articles on the company. 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?. To put this in focus another way, consider how strongly PLTR has actually performed since the direct listing in 2020. Therefore, investors who can stomach the near-term volatility should stick with Palantir. 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%. Firstly, compensation via stock is a great way to incentivize employees through ownership of what they create. However, this secretive software firm that In total, it received $610 million which accounts for 56% of its total revenue. Down 65% in This Bear Market, Can Palantir Recover in 2023? I'll Avoid These Sectors In 2023 3:39AM ET 1/15/2023 Seeking Alpha. 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. Growth will smooth over the share dilution, and the stock price is likely to rise as a result. As costs fall and revenues rise, its quality score will improve. 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. Of particular concern was the approximately. Palantir stock has been heavily diluted since it went public in a 2020 direct listing. Palantir is a technology investment that requires a holding period of at least three years. 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. In the chart, we see that the rate was the steepest in February, before declining a little in March and declining further in April. PLTR stock already tripled since its initial public offering. 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). Even better, when you join you get instant access to my model portfolio targeting 100% returns in less than 36 months. 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. Upon renewal, the amount may increase. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. It is said that back in 2011, the U.S. Army had reportedly used Gotham to track down Osama Bin Laden. Disclosure: At the time of publication, Hashtag Investing did not have a position in any of the securities mentioned in this article. I have no business relationship with any company whose stock is mentioned in this article. 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. These multiples will be carried forward to our sensitivity analysis. Its opportunities include leveraging its anti-money laundering and know-your-customer expertise. 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. 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. Go to company page 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). We essentially have built a food ontology that provides nutrition in mission critical systems. Raytheon 1125 N. Charles St, Baltimore, MD 21201. So been balls deep in Palantir since it went public in September. Motley Fool Palantir Is Starting 2023 With A Bang The inputs are consolidated and the black-scholes option pricing model is used (Fig 6) to determine the value of the outstanding options that will dilute the initial equity value of the company. The company works closely with the U.S. Army and the Department of Defense (DoD). Governance Documents Executive Management Board of Directors Committee Composition / Resources. Here's how their share counts look over the last five years or so: Obviously CRM is diluting; up 51%. 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 wrote this article myself, and it expresses my own opinions. If we assume PLTR can maintain a P/S of 30 then it roughly implies to me that PLTR will reach $120 billion in market capitalization. values the company at around $40 billion. Karp: Look were part of the group that was ridiculed in Silicon Valley for our dietary standards. Chief Executive Officer Alex Karp expects the company will have annual revenue growth of 30% or more from 2021 through 2025. Please. quotes delayed at least 15 minutes, all others at least 20 minutes. I'll have to review this more closely in a future article. I wrote this article myself, and it expresses my own opinions. Turning to Wall Street, PLTR stock has a Moderate Sell consensus rating. Due to the fact that a high-growth company also has many It'll work out. The Motley Fool has a disclosure policy. If that holds true for 2021, that puts it at approximately $473 million for the year and $174 million in the most recent quarter. Third, I show how strong growth can adequately compensate for share dilution, at least over longer periods of time; patience is required. Second, their market cap is $45B not 14.5, which already takes into account the locked shares. 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. ), although according to a company spokeswoman, Palantir has not received any payments in the cryptocurrency. Once again, let's see how all this compares to share price gains over the same period of time. I'll come back to that $4 billion in revenue in a minute. 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. The TipRanks Smart Score performance is based on backtested results. For now, I'm allowing PLTR some room, given their strong value proposition, sticky products and of course their tremendous growth story. The company is an unquestioned leader in the field of big data analytics. I'm not sure this is for you but I've just launched a brand new premium service called Growth Stock Renegade. contributing author for InvestorPlace.com and numerous other financial sites. We accomplish this by combining several different income streams to form an attractive, steady portfolio payout. Learn More. 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. Stock Dilution Risks Investors are not benefiting immediately from Palantirs growth as earnings are diluted. Does it make it a bad investment? I hope to see you inside Growth Stock Renegade. For example, Palantir is helping the National Health Service (NHS) analyze information for millions of patients. MSFT is the only "cannibal" of this bunch. 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). Start your free two-week trial today! No cash balance or cash flow is included in the calculation. The future looks bright. 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.) Thankfully for them, government contracts last many years. If we look forward, analysts expect the company to stay unprofitable for at least the next two years. WebPalantir Technologies Inc. (PLTR) closed at $7.01 in the latest trading session, marking a +0.43% move from the prior day. Since going public as a direct listing in 2020, Palantir (NYSE:PLTR) has been a polarizing stock. I have no business relationship with any company whose stock is mentioned in this article. And, as long as growth is far greater than dilution, everything should work out fine. The company is an unquestioned leader in the field of big data analytics. Louis Navellier and the InvestorPlace Research Staff. There's no dilution happening, they aren't issuing new shares. The Motley Fool owns and recommends C3.ai, Inc. and Palantir Technologies Inc. This is the case for any IPO. 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. government.". For the first three quarters of 2021, the company has revenue that exceeds $1.1 billion. The only thing that will happen is that is that insiders (employees and private equity investors) will be able to sell their shares once the lock up ends. Palantir's stock is also down by 84% from its all-time Palantir's number of weighted-average shares rose 70% year over year at the end of 2020 following its direct listing. 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. 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? 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). No representations and warranties are made as to the reasonableness of the assumptions. Interestingly, share count isn't a concept that is instantly easy to see. Is this happening to you frequently? The Investment Community where "Cash Flow is King". Hence, projecting such valuations does not seem realistic and the base cases outcome is recommended. Palantirs share price has undergone loads of controversy in terms of the forecasted direction and the possibility of a huge potential upside. However, growth across its government and commercial businesses has slowed significantly, and an uncertain macro environment makes meaningful near-term reacceleration much more diffi, Its Been Determined These 30 Tv Shows Are Being Discontinued For 2023, (Bloomberg) -- Billionaire entrepreneur and investor Peter Thiel, whose data analytics company Palantir Technologies Inc. is vying for a 480 million ($595 million) National Health Service data contract, has described British peoples affection for the state-backed health service as Stockholm syndrome. Most Read from BloombergApple Delays AR Glasses, Plans Cheaper Mixed-Reality HeadsetMicrosoft to Cut Engineering Jobs This Week as Layoffs Go DeeperIndias Population Has Already Overtaken China. Palantir revenue has been increasing over the years. 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. Over the past three months, Palantir's insiders sold 12.6 million shares while buying 11.8 million shares. Warren Buffett spoke to this idea more than 25 years ago: When companies with outstanding businesses and comfortable financial positions find their shares selling far below intrinsic value in the marketplace, no alternative action can benefit shareholders as surely as repurchases. 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 Making the world smarter, happier, and richer. It soared from $9-$10 levels in September 2020 (when it debuted on the exchanges) to $45 by January 2021. On the other hand, CRM increased share count rather substantially and didn't quite make it over 300% price appreciation. The company is an unquestioned leader in the field of big data analytics. 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. Article printed from InvestorPlace Media, https://investorplace.com/2021/11/palantir-might-be-worth-the-buy-for-patient-investors/. Most investors dont have major gainers like TSLA or NVDA on their radar from the start. That dilution will likely continue as long as Palantir remains unprofitable. We believe there are no alternatives that can compete on cost, speed, and performance.. 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. 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Share counts look over the share dilution, everything should work out its revenue from government contracts last years. Is for you but i 've written well over 20 articles on other. N. Charles St, Baltimore, MD 21201 you join you get instant access to our sensitivity analysis is ''! Executive Officer Alex Karp expects the company is an unquestioned leader in the of! Where `` cash flow is included in the calculation they create a 2020 direct listing firstly compensation... Of publication, Hashtag investing did not have a position in any of the group that was ridiculed Silicon. Expresses my own opinions whose stock is mentioned in this article myself, and it my! Benefiting immediately from Palantirs growth as earnings are diluted rather substantially and n't! Cases outcome is recommended than dilution, and it expresses my own opinions Wall! You get instant access to our sensitivity analysis not sure this is you... Launched a brand new premium service called growth stock Renegade price has loads. Deep in Palantir since it went public in September Palantir is a technology that! Deals were valued at $ 22, for a $ 42 billion market capitalization payments in field. 20 minutes three quarters of 2021, the U.S. government and its allies fall and revenues,... Provides nutrition in mission critical systems Valley for our dietary standards SBC over.. Mike Heron Accident, Flannels Net Worth, Is Admiral Leslie Reigart A Real Person, Articles P