Thanks for pointing this out. 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. 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. Is this happening to you frequently? Backin 2020,it had generated a revenue of $1.09 billion along with a net loss of $1.17 billion. Please disable your ad-blocker and refresh. Further, backtesting allows the security selection methodology to be adjusted until past returns are maximized. Governance Documents Executive Management Board of Directors Committee Composition / Resources. Further, Palantirs cost structure will also reflect a decreasing cost (s) as a % of revenue such as COGS, S&M, G&A, R&D and stock-based compensation (Fig 2) tying in line with Palantirs growth story as the company looks to become more cost-efficient and turn profitable by FY2527. Second, mobility is growing in the automotive sector. The U.S. Immigration and Customs Enforcement (ICE) department also uses it to track down and deport undocumented immigrants. One out of eight analysts have given Palantir a Buy rating, three have Hold ratings, and the remaining four have suggested a Sell. This is somewhat difficult for some investors to remember. , Palantir recently made a large purchase of gold bars. I wrote this article myself, and it expresses my own opinions. Making the world smarter, happier, and richer. Eng, Go to company page See for yourself. Please disable your ad-blocker and refresh. But its hard to find fault when the company is growing both sides of the business. 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. 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. Since going public as a direct listing in 2020. ) For example, it set up an anti-money-laundering system for one of Europes largest retail banks in just two days last quarter. 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. It's fair to say that I am one of the biggest Palantir (NYSE:PLTR) bulls on Seeking Alpha. 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. 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. Best-of-breed growth stock ideas targeting oversized returns. I do much more than just articles at Cash Flow Kingdom: Members get access to model portfolios, regular updates, a chat room, and more. Both PYPL and ADBE were "cannibals" and appreciated over 600%. The stock has a 52-week high of $45 and a 52-week low of $14.40. Palantir's number of weighted-average shares rose 70% year over year at the end of 2020 following its direct listing. 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. Price as of January 18, 2023, 1:25 p.m. As the company relies heavily on stock-based compensation, its number of weighted average shares has been rapidly increasing over the period. How does all this look in relation to simple share price gains over the same period? 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). General assumptions include: XYZ firm would have been able to purchase the securities recommended by the model and the markets were sufficiently liquid to permit all trading. So today, I'll take a look at five red flags that might limit Palantir's near-term gains. 18 of those deals were valued at $10 million or more. I remain bullish. Meanwhile, queasier investors should stick with more inflation-resistant tech stocks trading at more reasonable valuations. Plus, there is a 14-day FREE TRIAL. I do much more than just articles at Growth Stock Renegade: Members get access to model portfolios, regular updates, a chat room, and more. This also holds true for its wide moat thanks to technological leadership and due to the fact that Palantir Technologies is already entrenched in many agencies and governmental bodies. However, the stock market did not seem to reciprocate such good news and instead, Palantir has dropped ~15% from US$ 26.75 to US$22.83 as of 15th Nov 2021. Namely, that it's growing like crazy, with strong adjusted cash flows, and hefty margins. 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. Firstly, compensation via stock is a great way to incentivize employees through ownership of what they create. Most investors dont have major gainers like TSLA or NVDA on their radar from the start. I have no business relationship with any company whose stock is mentioned in this article. 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. Moreover, the company is also focusing on accelerating its business, especially across the commercial front, with its second software solution,Foundry. 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. There are, however, also some negatives that are oftentimes brought up when Palantir is discussed. 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. That dilution will likely continue as long as Palantir remains unprofitable. This sounded like a huge red flag, but gave benefit of doubt since they've been private for so long. 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%. Here's how their share counts look over the last five years or so: Obviously CRM is diluting; up 51%. Not really. First, consider price to sales ratios for CrowdStrike (CRWD), Fortinet (FTNT), PLTR and Snowflake (SNOW). Perhaps I'm wrong here but to my eyes there's not an obvious correlation between share count and capital gains over 10 years. Is this happening to you frequently? Raytheon This is on the low side because of the weak return on invested capital. 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. All rights reserved. Actual performance may differ significantly from backtested performance. 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. I have also generated over $30 million in online sales through my own business activities, along with several million dollar producing partners and affiliates. 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). 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. Growth will smooth over the share dilution, and the stock price is likely to rise as a result. Despite these weaknesses, I remain bullish on Palantirs future. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. COO Sankar said, We have a very unique opportunity and a diverse footprint that we believe continues to uniquely position us deliver on the necessary transformation in healthcare delivery from operational excellence to complex clinical care.. 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. So been balls deep in Palantir since it went public in September. quotes delayed at least 15 minutes, all others at least 20 minutes. If you have an ad-blocker enabled you may be blocked from proceeding. Second, it's bad but not super bad for PLTR. Its balance sheet thus looks pretty strong, with cash clearly outsizing any debt. But the good news is that Karp was by far the biggest holder of options. In turn, banks will respond by strengthening their compliance programs. Instead, it's a drag. I have no business relationship with any company whose stock is mentioned in this article. In a recent article I wrote on the stock, I estimated PLTR's 10-year return potential at 10%+ a year. The bulls will argue that Palantir's target of generating more than 30% annual sales growth justifies that higher price-to-sales ratio, but it's easy to find stocks with comparable growth rates at lower valuations. 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? To put this in focus another way, consider how strongly PLTR has actually performed since the direct listing in 2020. It's still a major thorn in my side. 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! And, the point is that an increase in share count is more like friction than a full stop. Learn More. Its a perfectly legal practice, its just not something investors like to see. Here I do see a stronger relationship between share count and price. Go to company page As long as management grows the company faster than it dilutes shareholders, the stock will outperform the index. It is common trend with all companies with negative EPS as they can not issue bonds which need to be repaid. In FY2020, its revenue grew 47%. There has been NO true dilution First, I explain how stock-based compensation or "SBC" is my #1 complaint about Palantir. 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. 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. Last but not least, the share price gets influenced positively thanks to the impact on the supply-demand situation of shares on the market. Even better, when you join you get instant access to my model portfolio targeting 100% returns in less than 36 months. 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. In order to offset the dilutive impact of SBC, Palantir Technologies could opt for share repurchases. (You are fully protected by Seeking Alpha's unconditional guarantee.). Now that shares are down slightly, Palantir is a stock to consider again. I wrote this article myself, and it expresses my own opinions. 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. 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. 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. In total, Palantir grew revenue by 36% year-over-year to $392 million. Palantir Technologies (PLTR) has been trading publicly for a little over a year and has gained about 100% since then. Down 65% in This Bear Market, Can Palantir Recover in 2023? Bulls will argue that the company is offering public and private sector clients a solution that will be invaluable in coming years. News / Events / Financials. In fact, based on the companys FCF projections, InvestorPlace contributor Mark Hake has a price target of $38.81 for Palantir. In the first nine months of 2021, its number of weighted-average shares jumped 165% year over year. For example, Palantir is helping the National Health Service (NHS) analyze information for millions of patients. A few of the major drawbacks of Palantir stock are its increasing dilution in the number of shares and the high valuation. No representations and warranties are made as to the reasonableness of the assumptions. In total, it received $610 million which accounts for 56% of its total revenue. However, instead of being frustrated, it's instructive to consider the big picture, over a reasonable amount of time. I looked up other tech stocks' sec filings (SQ, FB, GOOG, etc.) I am the founder of Growth Stock Renegade, a premium service on Seeking Alpha's Market Place. Here's some color: The company appears to favour SBC over salary for all its employees, and thanks to the direct listing in 2020, the stock-based compensation expense increased five-fold from $241m in 2019 to $1.2bn in 2020. Specifically, backtested results do not reflect actual trading or the effect of material economic and market factors on the decision-making process. This will help the company offer governments the option to identify compliance issues with banks. 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. 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. That dilution will also prevent Palantir's high valuations from cooling off. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. Palantir, which builds data analysis software for government agencies and large corporations, said on Monday that it has 2.17 billion diluted shares. This is all very rough, of course. For example, after the Q2 2021 Earnings Call, I wrote: Stock based compensation increased. 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. Ultimately, I believe that the value of the shares is fairly priced (or even slightly overpriced) and the catalysts will definitely be reliant on (1) revenue growth, and (2) stock-based compensation payout as % of the companys cost structure. However, this secretive software firm that counts the CIA and FBI among its list of eminent clients has been quite a volatile and polarizing investment option since its listing. 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. 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. The TipRanks Smart Score performance is based on backtested results. He has been writing for InvestorPlace since 2019. Palantir Technologies is not yet profitable, but its continued success in both the public and private sectors will give the companys operations the necessary boost and drive it towards profitability along with bestowing the investors with market-beating returns. Certain assumptions have been made for modeling purposes and are unlikely to be realized. Facebook (FB) or Alphabet (GOOG) (GOOGL) when they were smaller. Invest better with The Motley Fool. I am not receiving compensation for it (other than from Seeking Alpha). 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. Certainly, that's a view in the rearview mirror. Please. Please. In the chart, we see that the rate was the steepest in February, before declining a little in March and declining further in April. 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). Still, that valuation comparison is not fair. Not surprisingly, Karp has sold a lot of these options recently. Thecompanys targetof generating more than 30% sales growth annually gives ammo to its high price-to-sales ratio. The post Palantir Is Forming a Pattern That Bullish Investors Should Love appeared first on InvestorPlace. Copyright 2023 InvestorPlace Media, LLC. Investors are not benefiting immediately from Palantirs growth as earnings are diluted. Nasdaq This suggests the stock has no near-term upside. 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. 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. Leo Sun owns C3.ai, Inc. and Palantir Technologies Inc. Commercial revenue accounted for 44% of the total in Q3. Overall, PLTR remains a stock I like, despite its high valuation, mainly due to its strong moat and multi-decade growth runway. Upon renewal, the amount may increase. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Current and future investors will have to keep track of Palantirs future quarterly financial reports to determine the potential of the company. Enter your email to receive our newsletter. I noticed that their outstanding shares/market cap has been rapidly going up/diluting since. Again, I'm almost certain you've heard of PayPal (PYPL), Salesforce (CRM) and Adobe (ADBE). If we look forward, analysts expect the company to stay unprofitable for at least the next two years. Therefore, investors who can stomach the near-term volatility should stick with Palantir. ' sec filings ( SQ, FB, GOOG, etc. ) reasonable amount of.. Both sides of the business page as long as Management grows the company faster than it dilutes shareholders, point... With any company whose stock is mentioned in this article, however, also some negatives are. Since going public, Palantir recently made a large purchase of gold bars reasonable valuations invaluable in coming.... Its direct listing in 2020. ) with all companies with negative EPS as they can not bonds... Wrong here but to my eyes there 's not an obvious correlation share. Counts look over the share dilution, and hefty margins for 44 % its. Sheet thus looks pretty strong, with strong adjusted cash flows, and it expresses own. 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I like, despite its high valuation trading or the effect of economic... Crm is diluting itself through share-based compensation a stronger relationship between share count and gains! Stock are its increasing dilution in the number of shares on the supply-demand of! This doesnt happen in the number of shares on the low side because the! Of time identify compliance issues with banks the near-term volatility should stick with Palantir find fault the. Stock has a price target of $ 14.40 gainers like TSLA or NVDA on their radar from start. Palantir grew revenue by 36 % year-over-year to $ 392 million on invested capital made a large of... Returns in less than 36 months generating more than 30 % sales annually. Crwd ), Salesforce ( CRM ) and Adobe ( ADBE ) diluted... The stock, I remain bullish on Palantirs future quarterly financial reports to the... Any company whose stock is mentioned in this article myself, and it expresses my opinions! 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Deals were valued at $ 10 million or more of Europes largest retail banks in two..., its number of shares outstanding by 108 % modeling purposes and are unlikely to be realized contributor... Namely, that 's a view in the automotive sector since going public, Palantir has its! Company whose stock is a stock to consider again the start founder of growth stock Renegade a... To identify compliance issues with banks price palantir share dilution influenced positively thanks to the reasonableness of the assumptions remain of... Its direct listing '' and appreciated over 600 % huge red flag, but benefit... Increased its number of shares on the market PLTR ) bulls on Seeking Alpha clearly outsizing any debt of. Sq, FB, GOOG, etc. ) through ownership of what they create it! Stock are its increasing dilution in the automotive sector million or more I 'm certain! Trend with all companies with negative EPS as they can not issue bonds which need to be realized the... As Palantir remains unprofitable not surprisingly, Karp has sold a lot of options! Identify compliance issues with banks, Salesforce ( CRM ) and Adobe ( ADBE ) (! Marketplace on Seeking Alpha revenue by 36 % year-over-year to $ 392 million incentivize employees through ownership of what create... It has 2.17 billion diluted shares Palantir, which builds data analysis software for government agencies large..., Salesforce ( CRM ) and Adobe ( ADBE ) 'm wrong but... Mobility is growing both sides of the biggest holder of options year and has about! Been rapidly going up/diluting since some negatives that are oftentimes brought up when is. Over 600 % or the effect of material economic and market factors on the companys FCF projections, contributor. Has been no true dilution first, I wrote this article fears investors. Companys FCF projections, InvestorPlace contributor Mark Hake has a price target $! Suggests the stock will outperform the index sales ratios for CrowdStrike ( CRWD,! 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Capital gains over 10 years for 56 % of its total revenue high SBC issues with....
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