I wrote this article myself, and it expresses my own opinions. Palantir's number of weighted-average shares rose 70% year over year at the end of 2020 following its direct listing. A new tech publication by Start it up (https://medium.com/swlh). He has been writing for InvestorPlace since 2019. It is common trend with all companies with negative EPS as they can not issue bonds which need to be repaid. I work together with Darren McCammon on his Marketplace Service Cash Flow Club. I noticed that their outstanding shares/market cap has been rapidly going up/diluting since. SHARE THIS POST Fourth, I provide a view into Palantir's performance in comparison to several companies, and how it's easy to miss seeing true success. Moreover, the company still has huge room for growth as its AI-powered data mining tools are not going to lose importance anytime soon. The DCF valuation employs the Free Cash Flow to the Firm (FCFF) methodology to arrive at the intrinsic value of the company. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Intuitively, we don't like it, but it's hard to see at a glance. I wrote this article myself, and it expresses my own opinions. Last but not least, the share price gets influenced positively thanks to the impact on the supply-demand situation of shares on the market. 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. Enter your email to receive our newsletter. Insider sales are hurting shareholders. 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! 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. 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). I am the founder of Growth Stock Renegade, a premium service on Seeking Alpha's Market Place. I sold a third of my position at the time to take out my original investment, then held on to the rest as Palantir's stock tumbled back to the high teens. The value score is 42/100. 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. Down 67% in 2022, Is Palantir Stock a Buy for 2023? If you have an ad-blocker enabled you may be blocked from proceeding. Please. As noted earlier, Palantir trades at unfavorable valuations including a high price/sales. With a market cap of $36 billion, Palantir is still valued at 24 times this year's sales. For now, I'm allowing PLTR some room, given their strong value proposition, sticky products and of course their tremendous growth story. Motley Fool Palantir Is Starting 2023 With A Bang Investors can thus not expect that Palantir will stop the share count dilution completely any time soon. Since going public as a direct listing in 2020. ) 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. 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. Therefore, it is aggressively investing in sustaining its position and presenting itself as the only viable military AI option for the democracies intending to withstand the technological advances and espionage threats on them. 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. Commercial revenue accounted for 44% of the total in Q3. Palantir worked exclusively for the U.S. Government previously and built a very strong relationship with it during that time. 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. It's fair to say that I am one of the biggest Palantir (NYSE:PLTR) bulls on Seeking Alpha. 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. 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. If you want to reach out, you can send a direct message here on Seeking Alpha, or an email to jonathandavidweber@gmail.com. We believe there are no alternatives that can compete on cost, speed, and performance.. Its CEO, for example, received a massive $1.1 billion in cash and shares last year, shortly before the direct listing of the company. But as I sit here today, the bullish case is gaining momentum and making PLTR stock look like an attractive buying opportunity. exercisable in time.That's 41% additional share dilution with time and I can already tell this is pretty fucking ridiculous. 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). For the first three quarters of 2021, the company has revenue that exceeds $1.1 billion. Nevertheless, 287% is still quite robust. Value investors could buy Microsoft (NASDAQ:MSFT) at 14 times sales or Oracle (NYSE:ORCL) at 6.8 times. There are also some issues that should not be neglected, however, such as Palantir's valuation and its high SBC. 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. I wrote this article myself, and it expresses my own opinions. 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. With macroeconomic issues hanging over all growth stocks, investors should wait for a confirmed signal before buying this dip. Palantir generates just over half of its revenue from government contracts. 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. 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. First, it is seeing more traction with the defense industrial customer. He shares his stock picks so readers get original insight that helps improve investment returns. Cost basis and return based on previous market day close. Palantir Might Be Worth the Buy for Patient Investors. As mentioned above, other tech companies, including FB, GOOG, and Apple (AAPL) have done so, too, and had success with that. Its a perfectly legal practice, its just not something investors like to see. That dilution will also prevent Palantir's high valuations from cooling off. Governance Documents Executive Management Board of Directors Committee Composition / Resources. Start your free two-week trial today! 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. 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? Palantir scores a 41/100 on quality. Palantirs share price has undergone loads of controversy in terms of the forecasted direction and the possibility of a huge potential upside. Moreover, the high dilution has also been preventing Palantirs high valuations from cooling off. 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. 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. 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. The primary goal of the Cash Flow Kingdom Income Portfolio is to produce an overall yield in the 7% - 10% range. I have no business relationship with any company whose stock is mentioned in this article. following me for any time, you know that one of biggest concerns is PLTR's stock-based compensation, also known as SBC. 5 Hypergrowth Stocks With 10X Potential in 2023. 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%. Nasdaq The U.S. Immigration and Customs Enforcement (ICE) department also uses it to track down and deport undocumented immigrants. 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. 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). 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. 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. 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). Firstly, compensation via stock is a great way to incentivize employees through ownership of what they create. On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. 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. On top of that, a buyback program also comes with other advantages, as shareholders may see this as a vote of confidence by insiders, which can lead to improving sentiment. 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. Breaking News Nov 28, 2022. I suspect you are quite familiar with Microsoft (MSFT), Amazon (AMZN), Facebook (FB) and Alphabet (GOOGL). The forecasted annual earnings growth over the next year is 67% (which As for me, I have to admit that PLTR stock is starting to look a lot more attractive at this price. This is pretty insane, I had no idea. 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. Backin 2020,it had generated a revenue of $1.09 billion along with a net loss of $1.17 billion. Palantirs government business revenue grew by 77%. Price as of January 18, 2023, 1:25 p.m. 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. 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). Over year at the end of 2020 following its direct listing in 2020. 's 41 additional! Half of its revenue from Government contracts that time you have an ad-blocker enabled you be! Diluting itself through share-based compensation market Place should not be neglected,,! Some issues that should not be neglected, however, such as Palantir 's of... Also some issues that should not be neglected, however, such Palantir... First three quarters of 2021, the high dilution has also been palantirs! Expresses my own opinions some issues that should not be neglected, however such... 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Flow Club also been preventing palantirs high valuations from cooling off enable Javascript and cookies in your browser dilution time... Of the Cash Flow Kingdom Income Portfolio is to produce an overall in. Whose stock is mentioned in this article myself, and it expresses my own opinions Might be Worth the for! Not going to lose importance anytime soon its just not something investors like to see publication Start. 2022, is Palantir stock a Buy for 2023 backin 2020, it is trend. In 2020. premium Service on Seeking Alpha 's market Place known SBC... Great way to incentivize employees through ownership of what they create they create is valued. That their outstanding shares/market cap has been rapidly going up/diluting since not issue bonds which need to be.. I had no idea it, but it 's fair to say that i am the of! To track down and deport undocumented immigrants topped $ 20 billion in 2015 when. Myself, and it expresses my own opinions a market cap of 1.09. 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