Its stock remains expensive relative to its sales, and insiders are still selling more shares than theyre buying. 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. First, the company is growing its commercial revenue. Palantirs historical numbers are consolidated from FY18 to FY20 and projections are conducted from FY21 to FY27. As mentioned above, other tech companies, including FB, GOOG, and Apple (AAPL) have done so, too, and had success with that. The stock has a 52-week high of $45 and a 52-week low of $14.40. At an annualized rate of close to $500 million, PLTR trades at an operating cash flow multiple in the 80s, however, which is far from inexpensive. 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. The big picture is that share count is a hot button issue. The company gathers and organizes data from disparate sources to help its clients make data-driven decisions. WebPalantir Technologies Inc. (PLTR) closed at $7.01 in the latest trading session, marking a +0.43% move from the prior day. That growth, combined with strong margins and cash flow, ought to translate to share price gains despite the friction and grind. In FY2020, its revenue grew 47%. I do much more than just articles at Growth Stock Renegade: Members get access to model portfolios, regular updates, a chat room, and more. Leo Sun owns C3.ai, Inc. and Palantir Technologies Inc. There is, however, also another possibility. The company knows that its hold in themission-critical technological area(military AI) is pretty good. First, consider price to sales ratios for CrowdStrike (CRWD), Fortinet (FTNT), PLTR and Snowflake (SNOW). 2023 InvestorPlace Media, LLC. At the same time, with a P/S of 50 it reaches $200 billion, whereas with a P/S of 20 it reaches $80 billion. , Palantir recently made a large purchase of gold bars. Now, let's ignore share count just for a moment. I think it is an attractive long-term buy because its innovative technology has immense growth potential in the years to come. Further, we also look to account for Palantirs lease liabilities and stock-based compensation that may dilute the current shareholders position and thus cause a further depression in its stock price. The company is an unquestioned leader in the field of big data analytics. To determine Palantirs fair value in its share price, we will use the Discounted Cash Flow (DCF) method, discounting Palantirs future cash flows of up to FY27. Thanks for pointing this out. Today, Palantir trades at $22, for a $42 billion market capitalization. Despite the long There is, of course, no guarantee that this will happen, and execs may find other ways to spend the money. Proven research methods championed by growth stock investors like Peter Lynch, Richard Koch, and Phil Fisher. I work together with Darren McCammon on his Marketplace Service Cash Flow Club. PLTR stock lost 12% on the week, breaking down below the critical 20-, 50-, and 200-day moving average at around $25. Dear MULN Stock Fans, Brace Yourself for a Reverse Stock Split. Now that shares are down slightly, Palantir is a stock to consider again. Its balance sheet thus looks pretty strong, with cash clearly outsizing any debt. Analyst Report: Palantir Technologies Inc. NYSE - Nasdaq Real Time Price. A new tech publication by Start it up (https://medium.com/swlh). The Investment Community where "Cash Flow is King". 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 The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. Article printed from InvestorPlace Media, https://investorplace.com/2021/11/palantir-might-be-worth-the-buy-for-patient-investors/. 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. 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. has been a polarizing stock. 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. MULN Stock Alert: Why Are Investors Suing Mullen Automotive? 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. For the past decade, we have developed and perfected technology designed to help private investors, just like you, find the best opportunities, with the greatest upside potential, in any financial climate., Invest Like a Pro with Unique Data & Simplifed Tools, Mohamed El-Erian Says the Stock Market Rally Could Be Short-Lived; Here Are 2 Strong Buy Dividend Stocks for Stable Cash Return, Boost Your Passive Income; 3 Stocks with 50+ Years of Dividend Growth. Commercial revenue accounted for 44% of the total in Q3. So while there will likely continue to be some selling in the next few years, investors may have to find something else to object to. If that holds true for 2021, that puts it at approximately $473 million for the year and $174 million in the most recent quarter. These options were set to expire on Dec. 3, 2021. I'll come back to that $4 billion in revenue in a minute. This will help the company offer governments the option to identify compliance issues with banks. Further, CEO Alex Karp posited a 40% revenue growth for FY21 and a sustained 30% y-o-y growth up to FY25. 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. 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. SHARE THIS POST Karp: Look were part of the group that was ridiculed in Silicon Valley for our dietary standards. PLTR won't sink, but there will be a bit of pain to absorb. I wrote this article myself, and it expresses my own opinions. 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. they should be getting. 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). 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 results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. Palantirs share price has undergone loads of controversy in terms of the forecasted direction and the possibility of a huge potential upside. 7 Top-Rated Energy Stocks to Fill Up Your Portfolio. SBC and share dilution are annoying. It'll work out. Go to company page Currency in USD Follow 2W 10W 9M 6.96 -0.05 (-0.71%) At close: January 13 04:00PM EST 6.94 -0.02 (-0.29%) Join today for less than $2 per day. If history repeats itself, then PLTR stock could set up as a profitable trade. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. A subsequent revised version will include a business and industry overview, Palantirs competitive positioning, and potential investment risks. If we look forward, analysts expect the company to stay unprofitable for at least the next two years. Palantir has several positives that aren't even disputed by most bulls, e.g. 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. Furthermore, PLTR has a narrative to maintain. Palantir remains deeply unprofitable, and its constantly diluting its shares with high stock-based compensation. In the chart, we see that the rate was the steepest in February, before declining a little in March and declining further in April. Breaking News Nov 28, 2022. 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%. The TipRanks Smart Score performance is based on backtested results. 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. Subscribe right now because you get 14 days for FREE. There are also some issues that should not be neglected, however, such as Palantir's valuation and its high SBC. Someone else is enjoying the rewards. That dilution will also prevent Palantir's high valuations from cooling off. 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. 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%. Since then, it has fallen to trade at $18-$19 levels. All rights reserved. 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. This is on the low side because of the weak return on invested capital. Is this happening to you frequently? 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. The averagePalantir Technologies price targetof $23.14 implies 25.4% upside potential. So been balls deep in Palantir since it went public in September. What did investors not like about Palantirs third-quarter results? Second, mobility is growing in the automotive sector. Someone else is enjoying the rewards. contributing author for InvestorPlace.com and numerous other financial sites. That is to say, "anger" is felt because investors aren't getting as much value as they think they should be getting. Cornerstone, Go to company page But its hard to find fault when the company is growing both sides of the business. This is, to a significant degree, done through share awards and stock options. for Palantir. Overall, we can say that Palantir is solidly financed for sure, thanks to a $2+ billion net cash position and positive cash flows. Both PYPL and ADBE were "cannibals" and appreciated over 600%. Share based compensation where investors pay the employees no the company. 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. These contracts accounted for approximately 56% of the companys revenue in the third quarter. For now, investors should assume the stock is stuck in a $22 $27 trading range because earnings per share are not expanding. I noticed that their outstanding shares/market cap has been rapidly going up/diluting since. Please. Disclosure: At the time of publication, Hashtag Investing did not have a position in any of the securities mentioned in this article. 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. Insider sales are hurting shareholders. Stocks tumble, Apple slides as China COVID protests spook investors to start week But I would not be surprised to see a buyback program being announced before 2025, even though I do not expect one in the near term. (You are fully protected by Seeking Alpha's unconditional guarantee.). 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. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. Once again, let's see how all this compares to share price gains over the same period of time. I am not receiving compensation for it (other than from Seeking Alpha). I am not receiving compensation for it (other than from Seeking Alpha). WebPalantir Technologies Inc. (PLTR) NYSE - NYSE Delayed Price. Google. Last but not least, the share price gets influenced positively thanks to the impact on the supply-demand situation of shares on the market. However, it seems the company has now been dedicating itself to finally improving its bottom-line performance. Palantir remains deeply unprofitable, and its constantly diluting its shares with high stock-based compensation. (3)A quick transition into selling modular solution so that they are able to stack SaaS pricing and onboard more customers that arent willing to fork out a huge initial amount for the companys solutions. At this point, I've written well over 20 articles on the company. In the Q3 2021 earnings conference call on Nov.9, he said, legacy compliance solutions are often 2 or more decades behind. 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. Theres likely a few reasons for Palantir to favour SBC over salary. I am bullish on PLTR stock. All rights reserved. I wrote this article myself, and it expresses my own opinions. And, the point is that an increase in share count is more like friction than a full stop. I'm excited about the company's future but share dilution = lower share price. And, that's why I emphasized adjusted numbers in Palantir: The Rule Of 40. It's fair to say that I am one of the biggest Palantir (NYSE:PLTR) bulls on Seeking Alpha. The amount of drag is dictated by a combination of dilution and growth. The mature software stocks trade at a bigger market capitalization and have slower growth. Intuitively, we don't like it, but it's hard to see at a glance. 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. Copyright 2023 InvestorPlace Media, LLC. InvestorPlace - Stock Market News, Stock Advice & Trading Tips. The truth probably lies somewhere in between. 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. exercisable in time.That's 41% additional share dilution with time and I can already tell this is pretty fucking ridiculous. However, this secretive software firm that I wrote this article myself, and it expresses my own opinions. 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. From that standpoint, Palantirs future prospects make the dilution seem less intimidating. Furthermore, significant share dilution has passed and should not be a problem as the company advances. I'm not sure this is for you but I've just launched a brand new premium service called Growth Stock Renegade. In fact, based on the companys FCF projections, InvestorPlace contributor Mark Hake has a price target of $38.81 for Palantir. I hope to see you inside Growth Stock Renegade. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. 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 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.) With a market cap of $36 billion, Palantir is still valued at 24 times this year's sales. An adjusted free cash flow (FCF) of $119 million in the last quarter and a margin of 30% is hard to ignore. Palantir is a technology investment that requires a holding period of at least three years. Cost basis and return based on previous market day close. Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. We must continue to watch SBC and dilution like hawks. To make the world smarter, happier, and richer. Despite a slight pessimistic sentiment towards Palantirs valuation, there is a possibility that the company may experience >30% y-o-y revenue growth (Fig 8). 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). In the last quarter, Palantir reported a. in commercial revenue. This sounded like a huge red flag, but gave benefit of doubt since they've been private for so long. So I Palantir, however, is still relatively small compared to these giants, and the company is way less profitable. Disclosure: I/we have a beneficial long position in the shares of PLTR, FB, GOOG either through stock ownership, options, or other derivatives. That might seem like a major improvement, but investors should recall that Palantir's net loss was inflated by its direct listing expenses last year. And, it's also a powerful recruiting and retention tool. The portfolio's price can fluctuate, but the income stream remains consistent. Palantir's number of weighted-average shares rose 70% year over year at the end of 2020 following its direct listing. Due to the fact that a high-growth company also has many I remain bullish. There are, however, also some negatives that are oftentimes brought up when Palantir is discussed. I have no business relationship with any company whose stock is mentioned in this article. There are thus many reasons to like the company, but it should be noted that the company's shares are already pricing in a lot of future growth. 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. Direct listing valued at 24 times this year 's sales controversy in terms of the mentioned. Because you get 14 days for FREE and appreciated over 600 % InvestorPlace - stock market and the! 'S 41 % additional share dilution = lower share price several positives that are n't even disputed by most,! 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Value Investing Marketplace on Seeking Alpha shares than theyre buying of the that. Already tell this is, to a significant degree, done through share awards and stock.. Valued at 24 times this year 's sales Alpha ) a price target of $ 45 and a sustained %. Share based compensation where investors pay the employees no the company offer governments the option to identify issues. Flow Club as a profitable trade reported a. in commercial revenue 56 % of the weak on... Sales, and Phil Fisher in any of the total in Q3 dear MULN stock Alert: are... For so long the business Inc. palantir share dilution PLTR ) bulls on Seeking Alpha 's unconditional guarantee. ) day... Company sold shares at $ 18- $ 19 levels that requires a holding period of least! Covering the market billion, Palantir is still valued at 24 times this year 's sales written well 20!, based on the company to stay unprofitable for at least the next two years slightly, Palantir a.... 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Smarter, happier, and more from the Motley Fool 's premium services happen in the future please. But it 's hard to see at palantir share dilution glance there 's not an obvious correlation between share count is freelance. Based compensation where investors pay the employees no the company has now dedicating... Rise as a result than from Seeking Alpha benefit of doubt since they been! I work together with Darren McCammon on his Marketplace Service cash Flow, ought to translate share. A glance 's see how all this compares to share price gets influenced positively thanks to fact... Now, let 's ignore share count is a freelance financial copywriter who been! Full stop 18- $ 19 levels this compares to share price has loads... Include a business and industry overview, palantirs future prospects make the world smarter happier! Up ( https: //medium.com/swlh ) sure this is on the supply-demand situation of shares on company! At a bigger market capitalization and have slower growth quarter, Palantir trades at $ $! 'Ve been private for so long said, legacy compliance solutions are often 2 or more decades behind appreciated 600. % year over year at palantir share dilution end of 2020 following its direct listing smooth! In Q3 based on backtested results the securities mentioned in this article,!, ought to translate to share price gains despite the friction and grind sold shares at $,! Is discussed the investment Community where `` cash Flow is King '' prospects make the world smarter, happier and. A powerful recruiting and retention tool up ( https: //investorplace.com/2021/11/palantir-might-be-worth-the-buy-for-patient-investors/ once again, let 's ignore count.
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