Go to company page Here I do see a stronger relationship between share count and price. Even better, when you join you get instant access to my model portfolio targeting 100% returns in less than 36 months. 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. Value investors could buy Microsoft (NASDAQ:MSFT) at 14 times sales or Oracle (NYSE:ORCL) at 6.8 times. Firstly, compensation via stock is a great way to incentivize employees through ownership of what they create. Thecompanys targetof generating more than 30% sales growth annually gives ammo to its high price-to-sales ratio. 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. To make the world smarter, happier, and richer. The same was true for many other companies in a similar position, e.g. 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 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. Palantir Might Be Worth the Buy for Patient Investors. 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. Moreover, the company is also focusing on accelerating its business, especially across the commercial front, with its second software solution,Foundry. One out of eight analysts have given Palantir a Buy rating, three have Hold ratings, and the remaining four have suggested a Sell. 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. 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. I wrote this article myself, and it expresses my own opinions. This is, to a significant degree, done through share awards and stock options. And the companys overall revenue was up 36% YOY at $392 million. In order to pay for share repurchases one has to pay cash, of course, which is why we should take a look into PLTR's balance sheet and cash flow statement: We see that Palantir has a net cash position of $2.1 billion, not accounting for restricted cash. I do much more than just articles at Cash Flow Kingdom: Members get access to model portfolios, regular updates, a chat room, and more. Due to the fact that a high-growth company also has many 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. Palantir Technologies (PLTR) has an average rating of hold and price targets ranging from $4.50 to $15, according to analysts polled by Capital IQ. 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. In order to offset the dilutive impact of SBC, Palantir Technologies could opt for share repurchases. government.". 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. Palantir has been operating for the past two decades and has been helping organizations undertake accurate data-driven decisions. Leo Sun owns C3.ai, Inc. and Palantir Technologies Inc. We have war fighters who follow our nutrition. I know usual share dilution doesn't affect the company's fundamentals/story, but this seems way too extreme for shareholders to ignore. 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. 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). Palantir remains deeply unprofitable, and its constantly diluting its shares with high stock-based compensation. its strong growth and its great position in its industry. He shares his stock picks so readers get original insight that helps improve investment returns. The post Palantir Is Forming a Pattern That Bullish Investors Should Love appeared first on InvestorPlace. Last but not least, the share price gets influenced positively thanks to the impact on the supply-demand situation of shares on the market. from when they initially went public and their dilution ranged from 10-20% (most in the low 10s).What does this mean? Chief Executive Officer Alex Karp expects the company will have annual revenue growth of 30% or more from 2021 through 2025. 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. 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 doesn't fit that profile yet, and its ongoing dilution and automated stock sales could prevent its inside buyers from outnumbering the sellers. It's still a major thorn in my side. This is on the low side because of the weak return on invested capital. Perhaps I'm wrong here but to my eyes there's not an obvious correlation between share count and capital gains over 10 years. The profusion of opinions on social media and financial blogs makes it impossible to distinguish between real growth potential and pure hype. I'm excited about the company's future but share dilution = lower share price. Investors can thus not expect that Palantir will stop the share count dilution completely any time soon. If history repeats itself, then PLTR stock could set up as a profitable trade. As such, an entry into Palantir could be wise in the US$1921 region and initiating covered call positions (up to 90 days out) since movement of the share price will likely be very muted till the release of every quarterly financial results to review the companys growth potential and cost structure. I wrote this article myself, and it expresses my own opinions. Enter your email to receive our newsletter. And when you join, I'll instantly share my actively managed growth stock portfolio. 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. Down 65% in This Bear Market, Can Palantir Recover in 2023? 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. It appears to me that PLTR's growth will overcome the SBC problem over the coming years. 5 Hypergrowth Stocks With 10X Potential in 2023. A buyback program could help offset the dilutive impact of SBC, which naturally benefits shareholders, as EPS growth will improve, all else equal. Backtested results are adjusted to reflect the reinvestment of dividends and other income and, except where otherwise indicated, are presented gross-of fees and do not include the effect of backtested transaction costs, management fees, performance fees or expenses, if applicable. PLTR won't sink, but there will be a bit of pain to absorb. Invest better with The Motley Fool. 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 $1.02 billion. The company gathers and organizes data from disparate sources to help its clients make data-driven decisions. Perhaps it would be easier for investors to accept Palantirs dabbling in gold and bitcoin if it wasnt for the continuing dilution of shares that is happening as management exercises warrants. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. All rights reserved. Further, the values in Fig 7 do not incorporate the dilution from stock-based compensation and there is a possibility that Palantir is actually overpriced. Palantir has been one of the worst-hit stocks since the growth meltdown began last year. Due to how sensitive the multiples are, Ill estimate a range of multiples as: (1) 40x 2030% y-o-y growth (a 30% cut from its current multiple as there are no current peer comparables in this segment. Someone else is enjoying the rewards. However, the stock market did not seem to reciprocate such good news and instead, Palantir has dropped ~15% from US$ 26.75 to US$22.83 as of 15th Nov 2021. Again, I'm almost certain you've heard of PayPal (PYPL), Salesforce (CRM) and Adobe (ADBE). I am not receiving compensation for it (other than from Seeking Alpha). Palantir has customers in the mobility space that includes original equipment manufacturers (OEM), their suppliers, EV charging companies, and insurers. Uber, Lucky you got in in September. Feast your eyes on their share counts over the last 10 years or so. And, that's also in line with PLTR's long-term sales view, back from Q4 2020. Backtested performance is not an indicator of future actual results. MSFT is the only "cannibal" of this bunch. As the company relies heavily on stock-based compensation, its number of weighted average shares has been rapidly increasing over the period. 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. Backin 2020,it had generated a revenue of $1.09 billion along with a net loss of $1.17 billion. Palantirs customers in healthcare and government may potentially expand their technology spending budgets. I'll have to review this more closely in a future article. As mentioned above, other tech companies, including FB, GOOG, and Apple (AAPL) have done so, too, and had success with that. If Palantir was growing its government side of the business at the exclusion of its commercial side, it would be concerning. Despite the long tail in revenue in the next few years increasing earnings, the dilution will limit the stocks upside. But its hard to find fault when the company is growing both sides of the business. Disclosure: At the time of publication, Hashtag Investing did not have a position in any of the securities mentioned in this article. Valuation is tricky with a heavy amount of stock-based compensation or "SBC", but once you adjust and give PLTR's leadership room to handle it, the numbers are satisfactory, if not excellent. Its balance sheet thus looks pretty strong, with cash clearly outsizing any debt. 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. 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. As for me, I have to admit that PLTR stock is starting to look a lot more attractive at this price.
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