In fact, based on the companys FCF projections. Perhaps it would be easier for investors to accept Palantirs dabbling in gold and bitcoin if it wasnt for the continuing dilution of shares that is happening as management exercises warrants. 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. Intuitively, we don't like it, but it's hard to see at a glance. In FY2020, its revenue grew 47%. 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. 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. Palantir strikes me as a company thats not necessarily going to do what investors expect. One way to reduce the impact of SBC would be to lower issuance, i.e. Go to company page Growth will smooth over the share dilution, and the stock price is likely to rise as a result. Further, CEO Alex Karp posited a 40% revenue growth for FY21 and a sustained 30% y-o-y growth up to FY25. Palantir is a high-growth company that operates worldwide in both commercial and government segments. The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be reliable, but the author(s) does not make any representation or warranty, express or implied, as to its accuracy or completeness. Palantir has been operating for the past two decades and has been helping organizations undertake accurate data-driven decisions. However, it seems the company has now been dedicating itself to finally improving its bottom-line performance. Google. This is pretty insane, I had no idea. 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. 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! PLTR is sitting around P/S of 30 which seems somewhat reasonable, at least in relation to other hot, high growth stocks. Quarterly Results SEC Filings / Governance. Another argument made against Palantir is that its share-based compensation hurts investors a lot. In the last quarter, Palantir reported a 37% year-over-year (YOY) increase in commercial revenue. 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. See for yourself. And, the point is that an increase in share count is more like friction than a full stop. MSFT is the only "cannibal" of this bunch. Copyright 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. From Palantirs current financials and its projections at FY21, we can conclude that the companys future growth story for the next 36months is crucial to determine if the stock can experience a surge in price, since its current operating structures in FY21 has experienced a huge improvement with respect to its top line revenue growth. Interestingly, share count isn't a concept that is instantly easy to see. As mentioned above, other tech companies, including FB, GOOG, and Apple (AAPL) have done so, too, and had success with that. 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. 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. We have war fighters who follow our nutrition. Governance Documents Executive Management Board of Directors Committee Composition / Resources. Backtested performance is developed with the benefit of hindsight and has inherent limitations. The profusion of opinions on social media and financial blogs makes it impossible to distinguish between real growth potential and pure hype. Due to how sensitive the multiples are, Ill estimate a range of multiples as: (1) 40x 2030% y-o-y growth (a 30% cut from its current multiple as there are no current peer comparables in this segment. for Palantir. Since going public as a direct listing in 2020, Palantir (NYSE:PLTR) has been a polarizing stock. exercisable in time.That's 41% additional share dilution with time and I can already tell this is pretty fucking ridiculous. From that standpoint, Palantirs future prospects make the dilution seem less intimidating. 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. Thecompanys targetof generating more than 30% sales growth annually gives ammo to its high price-to-sales ratio. Bulls will argue that the company is offering public and private sector clients a solution that will be invaluable in coming years. The U.S. Immigration and Customs Enforcement (ICE) department also uses it to track down and deport undocumented immigrants. its strong growth and its great position in its industry. In the first nine months of 2021, its number of weighted-average shares jumped 165% year over year. Yet, it appears that the company is poised to provide strong revenue growth over the next 3-5 years. Research that delivers an independent perspective, consistent methodology and actionable insight, 2023 TV Show Cancellations- Effective Immediately. 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. 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. The company is one of the most trusted analytics platforms for the U.S. government and its allies. Louis Navellier and the InvestorPlace Research Staff. I have no business relationship with any company whose stock is mentioned in this article. 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 Strong deal value, growing 50% to $3.6 billion, signals strong business ahead. 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. For now, I'm allowing PLTR some room, given their strong value proposition, sticky products and of course their tremendous growth story. He shares his stock picks so readers get original insight that helps improve investment returns. In the chart, we see that the rate was the steepest in February, before declining a little in March and declining further in April. has been a polarizing stock. Palantir has customers in the mobility space that includes original equipment manufacturers (OEM), their suppliers, EV charging companies, and insurers. On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The stock has a 52-week high of $45 and a 52-week low of $14.40. I wrote this article myself, and it expresses my own opinions. 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. 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%. 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. 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. The Upside Potential for SOFI Stock Is Limited. I hope to see you inside Growth Stock Renegade. All rights reserved. What did investors not like about Palantirs third-quarter results? This is somewhat difficult for some investors to remember. 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. Palantir expects revenue will grow by 40% to $1.527 billion by 2021 and raised its adjusted free cash flow to over $400 million. Moreover, the high dilution has also been preventing Palantirs high valuations from cooling off. Subscribe right now because you get 14 days for FREE. Down 67% in 2022, Is Palantir Stock a Buy for 2023? I have no business relationship with any company whose stock is mentioned in this article. 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. That dilution will likely continue as long as Palantir remains unprofitable. But the good news is that Karp was by far the biggest holder of options. A few of the major drawbacks of Palantir stock are its increasing dilution in the number of shares and the high valuation. Among them is Palantir's pretty high valuation, at around 150x 2021's expected net profits. Due to the fact that a high-growth company also has many 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. Actual performance may differ significantly from backtested performance. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. 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. We essentially have built a food ontology that provides nutrition in mission critical systems. 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. This information is provided for illustrative purposes only. And, that's why I emphasized adjusted numbers in Palantir: The Rule Of 40. Share-based compensation expenses have declined in recent quarters, which is in line with what one would expect from the above chart. Palantir Might Be Worth the Buy for Patient Investors. The primary goal of the Cash Flow Kingdom Income Portfolio is to produce an overall yield in the 7% - 10% range. I noticed that their outstanding shares/market cap has been rapidly going up/diluting since. Here I do see a stronger relationship between share count and price. 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. Palantir generated $1.09 billion in revenue in 2020, but it posted a whopping net loss of $1.17 billion. The information is not intended to be used as the basis of any investment decision by a person or entity. I wrote this article myself, and it expresses my own opinions. 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. I suspect you are quite familiar with Microsoft (MSFT), Amazon (AMZN), Facebook (FB) and Alphabet (GOOGL). Stocks tumble, Apple slides as China COVID protests spook investors to start week Perhaps surprisingly, both PYPL and ADBE have fewer shares outstanding now than earlier, and that's despite being high growth companies. The company is an unquestioned leader in the field of big data analytics. 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. 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. Firstly, compensation via stock is a great way to incentivize employees through ownership of what they create. Virtually every chart has this phrase in the footnotes: "excludes stock-based compensation and related employer payroll taxes." 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. 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. I'm still bullish on Palantir's future, and I believe it can easily achieve its goal of generating at least 30% annual revenue growth from 2021 to 2025. 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. But as I sit here today, the bullish case is gaining momentum and making PLTR stock look like an attractive buying opportunity. I have no business relationship with any company whose stock is mentioned in this article. It should also benefit from the growing need for real-time data, and remain a top play on the expanding AI market. 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. Thankfully for them, government contracts last many years. Furthermore, PLTR has a narrative to maintain. 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. Plus, there is a 14-day FREE TRIAL. 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. There's no dilution happening, they aren't issuing new shares. Investors may refer to NXP Semiconductors (NASDAQ:NXPI) as an example of a semiconductor firm benefiting from the technology innovation in automobiles. 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%. On the other hand, CRM increased share count rather substantially and didn't quite make it over 300% price appreciation. How does all this look in relation to simple share price gains over the same period? 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). 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. 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. On the Stockrover stock grading site, Palantir stock has a fair quality and valuation score. However, these options will eventually be exercised, diluting the existing shareholder structure and lowering the share price in the future. Its a perfectly legal practice, its just not something investors like to see. 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. Palantirs share price has undergone loads of controversy in terms of the forecasted direction and the possibility of a huge potential upside. Stock Prodigy Who Found NIO at $2 Says Buy THIS Now, Man Who Called Black Monday: Prepare Now.. 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. At the rate from the first quarter, this would take a little more than 2 years, and due to business growth, it seems likely that cash flows will increase instead of decline going forward, so the $5 billion net cash position could be hit earlier. 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). Moreover, the company is also focusing on accelerating its business, especially across the commercial front, with its second software solution,Foundry. PLTR stock lost 12% on the week, breaking down below the critical 20-, 50-, and 200-day moving average at around $25. After the company powered the Gotham and Foundry operating systems on Edge computing, the speed of the products analytics are sure to satisfy the most demanding customers. Its stock remains expensive relative to its sales, I appreciate your feedback, comments and questions. Palantir Technologies Inc. shares fell the most in almost a year after the data software company reported financial results that illustrated a continued lack of net profit. I do much more than just articles at Cash Flow Kingdom: Members get access to model portfolios, regular updates, a chat room, and 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. Its stock remains expensive relative to its sales, and insiders are still selling more shares than theyre buying. Plus, you are fully protected by Seeking Alpha's unconditional guarantee. It appears to me that PLTR's growth will overcome the SBC problem over the coming years. Enter your email to receive our newsletter. 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. Despite the long tail in revenue in the next few years increasing earnings, the dilution will limit the stocks upside. Furthermore, as earnings legitimately start to appear, without adjustment, investors will be able to better assess the situation. Breaking News Nov 28, 2022. Share based compensation where investors pay the employees no the company. Dear MULN Stock Fans, Brace Yourself for a Reverse Stock Split. Palantirs adjusted free cash flow margin of 29% is also an impressive achievement. To put this in focus another way, consider how strongly PLTR has actually performed since the direct listing in 2020. Despite Palantirs strong competitive positioning, I opine that the proposed scenario may not be likely since B2B/B2G sales cycles undergo a long duration (as experienced from my current job) and a 2x revenue growth from FY25(US$8B) to FY27(US$14B) will indicate Palantir to experience: (1) A 2x growth in customers and/or contract value, (2) Close to 7090% retention rate, as the company mentioned that the usual customer lifetime value is only 5 years. 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. Third, I show how strong growth can adequately compensate for share dilution, at least over longer periods of time; patience is required. 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. Third, there's a good reason for SBC and therefore share dilution. 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 Of course, revenue growth of 30% for the next several years is impressive. Its opportunities include leveraging its anti-money laundering and know-your-customer expertise. 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. On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. Palantir's stock is also down by 84% from its all-time Current and future investors will have to keep track of Palantirs future quarterly financial reports to determine the potential of the company. Please. Despite these weaknesses, I remain bullish on Palantirs future. Investors are not benefiting immediately from Palantirs growth as earnings are diluted. Palantir has a strong moat that gives customers an edge. 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.
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