Since going public as a direct listing in 2020. ) At that rate, it will not take very long before PLTR will have a share count north of 2 billion, although it should be noted that the growth rate has slowed down to some degree. 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. Leo Sun owns C3.ai, Inc. and Palantir Technologies Inc. Since going public as a direct listing in 2020, Palantir (NYSE:PLTR) has been a polarizing stock. Best-of-breed growth stock ideas targeting oversized returns. Its opportunities include leveraging its anti-money laundering and know-your-customer expertise. The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. they should be getting. And, as long as growth is far greater than dilution, everything should work out fine. Financial Market Data powered by FinancialContent Services, Inc. All rights reserved. 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. In FY2020, its revenue grew 47%. Upon renewal, the amount may increase. 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%) Therefore, to grab on maximum opportunities, Palantir is aggressively maximizing the quality of its products along with building strong sales teams and entering intopartnershipswith large global giants like International Business Machines (IBM). 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. 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. Second, it's bad but not super bad for PLTR. Is this happening to you frequently? I wrote this article myself, and it expresses my own opinions. In the last quarter, Palantir reported a 37% year-over-year (YOY) increase in commercial revenue. 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. PLTR won't sink, but there will be a bit of pain to absorb. Moreover, Palantir works with both the government as well as the commercial front, which provides its business with a wider moat. 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. In its SEC filings, the company says its long-term goal is to make Gotham, its data mining platform, which serves dozens of government agencies, the "default operating system for data across the U.S. Expect the company to win more customers in the coming year. Of course, revenue growth of 30% for the next several years is impressive. The profusion of opinions on social media and financial blogs makes it impossible to distinguish between real growth potential and pure hype. This is all very rough, of course. Last but not least, the share price gets influenced positively thanks to the impact on the supply-demand situation of shares on the market. Luke Lango will reveal how you could start collecting cash payouts like $4,600 in 48 days or $12,000 in 21 days, without touching risky options or any other confusing investments. Someone else is enjoying the rewards. Feast your eyes on their share counts over the last 10 years or so. 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. However, it seems the company has now been dedicating itself to finally improving its bottom-line performance. Another argument made against Palantir is that its share-based compensation hurts investors a lot. Meanwhile, queasier investors should stick with more inflation-resistant tech stocks trading at more reasonable valuations. 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. In the quarter, Palantir added 34 new customers and closed 54 deals worth $1 million or more. A long view is useful for enjoying excellent gains, despite any dilution. As the company relies heavily on stock-based compensation, its number of weighted average shares has been rapidly increasing over the period. In an effort to guard against black swan events, Palantir recently made a large purchase of gold bars. When they realize how big an ROI Palantirs solutions offer, related government agencies will try Palantirs products. Please disable your ad-blocker and refresh. And the companys overall revenue was up 36% YOY at $392 million. Hence, projecting such valuations does not seem realistic and the base cases outcome is recommended. 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. Perhaps I'm wrong here but to my eyes there's not an obvious correlation between share count and capital gains over 10 years. Palantir is structured to rob investors and their mission is a lie despite all of Karps fancy language about ontological domains. Share dilution from 244 million at IPO to 1.6 billion. In turn, banks will respond by strengthening their compliance programs. No representations and warranties are made as to the reasonableness of the assumptions. Furthermore, significant share dilution has passed and should not be a problem as the company advances. Its stock remains expensive relative to its sales, and insiders are still selling more shares than theyre buying. Please. 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. Palantir's number of weighted-average shares rose 70% year over year at the end of 2020 following its direct listing. Invest better with The Motley Fool. 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. Palantir Might Be Worth the Buy for Patient Investors. Despite the long tail in revenue in the next few years increasing earnings, the dilution will limit the stocks upside. So been balls deep in Palantir since it went public in September. Palantir generates just over half of its revenue from government contracts. Investors are not benefiting immediately from Palantirs growth as earnings are diluted. I do much more than just articles at Cash Flow Kingdom: Members get access to model portfolios, regular updates, a chat room, and more. Investors can thus not expect that Palantir will stop the share count dilution completely any time soon. In the last quarter, Palantir reported a. in commercial revenue. However, this secretive software firm that 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. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. Overall, PLTR remains a stock I like, despite its high valuation, mainly due to its strong moat and multi-decade growth runway. Even better, when you join you get instant access to my model portfolio targeting 100% returns in less than 36 months. *Average returns of all recommendations since inception. One of, if not THE most heavily compensated CEO of any US company in 2021. Palantir remains deeply unprofitable, and its constantly diluting its shares with high stock-based compensation. Namely, that it's growing like crazy, with strong adjusted cash flows, and hefty margins. I am not receiving compensation for it (other than from Seeking Alpha). I write about venture capital, equity research, and data analysis. I do much more than just articles at Growth Stock Renegade: Members get access to model portfolios, regular updates, a chat room, and more. Value investors could buy Microsoft (NASDAQ:MSFT) at 14 times sales or Oracle (NYSE:ORCL) at 6.8 times. 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. We must continue to watch SBC and dilution like hawks. Start your free two-week trial today! 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. ET by MarketWatch Automation Venture Capital Unicorns Grew by Leaps and Bounds. That growth, combined with strong margins and cash flow, ought to translate to share price gains despite the friction and grind. 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 had a share price of $30. Analyst Report: Palantir Technologies Inc. NYSE - Nasdaq Real Time Price. 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. All rights reserved. From that standpoint, Palantirs future prospects make the dilution seem less intimidating. Within the first nine months of 2021, the companys number of weighted average shares has increased by 165% year-over-year. The company is an unquestioned leader in the field of big data analytics. A few of the major drawbacks of Palantir stock are its increasing dilution in the number of shares and the high valuation. But the good news is that Karp was by far the biggest holder of options. To make the world smarter, happier, and richer. First, the company is growing its commercial revenue. Lets take a look at their Government and Commercial business. Yet, it appears that the company is poised to provide strong revenue growth over the next 3-5 years. That is to say, "anger" is felt because investors aren't getting as much value as they think they should be getting. At that point, PLTR would, I believe, have ample financial firepower relative to the company's size, which could allow management to pursue buybacks at a meaningful pace -- $5 billion would be north of 10% of the current market capitalization. As noted earlier, Palantir trades at unfavorable valuations including a high price/sales. 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. 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.) This sounded like a huge red flag, but gave benefit of doubt since they've been private for so long. 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). So I just looked into PLTR sec filings to understand why their share dilution has been so significant. I am an investor, entrepreneur, father, husband, coach and teacher. Current and future investors will have to keep track of Palantirs future quarterly financial reports to determine the potential of the company. And, the point is that an increase in share count is more like friction than a full stop. He has been writing for InvestorPlace since 2019. As for me, I have to admit that PLTR stock is starting to look a lot more attractive at this price. Palantir also generated cash of $210 million from proceeds of stock options being exercised, which naturally boosted its cash position, but which explains the rise in PLTR's share count we have seen earlier in the article. I am not receiving compensation for it (other than from Seeking Alpha). Since then, it has fallen to trade at $18-$19 levels. Its stock remains expensive relative to its sales, TipRanks is a comprehensive research tool that helps investors make better, data-driven investment decisions. 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. Of particular concern was the approximately. Palantir has customers in the mobility space that includes original equipment manufacturers (OEM), their suppliers, EV charging companies, and insurers. I looked up other tech stocks' sec filings (SQ, FB, GOOG, etc.) 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. Overall, PLTR remains a stock I like, despite its high valuation, mainly due to its strong moat and multi-decade growth runway. 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. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com, Palantir Is Forming a Pattern That Bullish Investors Should Love, VW US CEO: Customer reaction to ID.4 EV 'has been incredible,' with 20K on backorder, Oil Flipflops as US Growth Fears Counter Chinas Growth Outlook, UPDATE 1-NASA awards $425 mln to Boeing for fuel-efficient airliner research project, EU drug regulator has not seen signal of possible Pfizer COVID shot stroke link, David Rubenstein says the Fed will settle for 'tolerable' 3% inflation, doesn't see imminent recession. Is this happening to you frequently? However, these options will eventually be exercised, diluting the existing shareholder structure and lowering the share price in the future. Palantir SBC is costly and is here to stay, therefore must be incorporated into a financial valuation. Stock Prodigy Who Found NIO at $2 Says Buy THIS Now, Man Who Called Black Monday: Prepare Now.. (New pick just posted.). 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 Enter your email to receive our newsletter. Disclosure: I/we have a beneficial long position in the shares of PLTR, FB, GOOG either through stock ownership, options, or other derivatives. Breaking News Nov 28, 2022. Palantir generated $1.09 billion in revenue in 2020, but it posted a whopping net loss of $1.17 billion. contributing author for InvestorPlace.com and numerous other financial sites. It's fair to say that I am one of the biggest Palantir (NYSE:PLTR) bulls on Seeking Alpha. 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. 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. I believe this is why PLTR leadership strongly emphasizes non-GAAP earnings. Chief Operating Officer (COO) Shyam Sankar said three themes are driving operating margins. Just as it looked as though Palantir Technologies (NYSE:PLTR) would rally again, its quarterly earnings rained on its parade. 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. Backtested performance is developed with the benefit of hindsight and has inherent limitations. 1125 N. Charles St, Baltimore, MD 21201. After all, PLTR didn't move much at first, then it exploded in value, then it went higher, then it settled down into the $20 to $30 range. Nevertheless, 287% is still quite robust. Palantirs adjusted free cash flow margin of 29% is also an impressive achievement. 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. Despite these weaknesses, I remain bullish on Palantirs future. Disclaimer: This initiated report is only a primer version it does not conduct a deep dive in the software-infrastructure technology market segment, but to incorporate managements overall guidance and analyse the companys operational structure to determine the fair value of the company. Commercial revenue accounted for 44% of the total in Q3. ), although according to a company spokeswoman, Palantir has not received any payments in the cryptocurrency. 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. So today, I'll take a look at five red flags that might limit Palantir's near-term gains. 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. Eng, Go to company page 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. PLTR's unique software can create significant operational value for its customers, and ongoing global disruptions like the pandemic and war can help to catalyze adoption further. We have war fighters who follow our nutrition. Stocks tumble, Apple slides as China COVID protests spook investors to start week Palantir doesn't fit that profile yet, and its ongoing dilution and automated stock sales could prevent its inside buyers from outnumbering the sellers. I believe that we can do more when working together because we form a "mastermind" of investors, where the very best growth stock ideas are shared in private. Since October 2020, Palantirs stocks 1-year return has outperformed a number of the worlds most popular media and tech companies: DIS, AAPL, TSLA, According to Tipranks, Jonathan is among the top 0.5% of bloggers (as of January 10, 2022: https://www.tipranks.com/bloggers/jonathan-weber). The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. 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%. 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. Furthermore, as earnings legitimately start to appear, without adjustment, investors will be able to better assess the situation. At an annualized $1.57 billion and a $45.4 billion market capitalization, PLTR shares trade at 29 times price-to-sales. 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. It's my #1 issue with PLTR. 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%. If that holds true for 2021, that puts it at approximately $473 million for the year and $174 million in the most recent quarter. Banks may justify the return on investment (ROI) based only on the speed of the installation. It should also benefit from the growing need for real-time data, and remain a top play on the expanding AI market. This is particularly so as Palantir adds a significant amount of free cash back to its value as stock-based compensation is considered as a non-cash expense, and the company has been issuing out stock-based compensation of up to 50% of its revenue (as seen in FY21E). Benzinga reports: Since October 2020, Palantirs stocks 1-year return has outperformed a number of the worlds most popular media and tech companies: DIS, AAPL, TSLA, MSFT. And I can certainly understand if investors might wonder why the company chose to deploy capital in this way as opposed to buying back shares. MULN Stock Alert: Why Are Investors Suing Mullen Automotive? 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. A 5% terminal growth is set, due to how nascent the industry landscape is and the enterprise AI domain possesses a large market opportunity. Nevertheless, in 12 months, it's beaten some of the world's best companies. 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. Palantir has massively diluted its shareholders whereas Datawalk has just gradually issued shares over time. Today, Palantir trades at $22, for a $42 billion market capitalization. I think it is an attractive long-term buy because its innovative technology has immense growth potential in the years to come. Further, CEO Alex Karp posited a 40% revenue growth for FY21 and a sustained 30% y-o-y growth up to FY25. reduce the number of new stock options that are awarded to execs and employees. Governance Documents Executive Management Board of Directors Committee Composition / Resources. Second, their market cap is $45B not 14.5, which already takes into account the locked shares. The future looks bright. First, it is seeing more traction with the defense industrial customer. All of this is to make an even more important point today. from when they initially went public and their dilution ranged from 10-20% (most in the low 10s).What does this mean? Right now is the perfect time to subscribe because it's affordable for any budget. Insider sales are hurting shareholders. Still, that valuation comparison is not fair. The Motley Fool owns and recommends C3.ai, Inc. and Palantir Technologies Inc. Thanks for pointing this out. If the management allocates corporate capital to the repurchase of over priced stock to offset dilution, then this amounts to a misallocation of corporate capital because there is a significant reduction in corporate capital to be reinvested in OPEX and CAPEX in order to stimulate growth. But earlier this year, a leaked government document revealed that Immigration and Customs Enforcement (ICE) wanted to replace FALCON, the agency's customized version of Gotham, with a new in-house platform called RAVEn. 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 have no business relationship with any company whose stock is mentioned in this article. For the first three quarters of 2021, the company has revenue that exceeds $1.1 billion. . He shares his stock picks so readers get original insight that helps improve investment returns. Gross margins are stronger than the S&P 500 average. I work together with Darren McCammon on his Marketplace Service Cash Flow Club. Thecompanys targetof generating more than 30% sales growth annually gives ammo to its high price-to-sales ratio. 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. Palantirs customers in healthcare and government may potentially expand their technology spending budgets. As mentioned above, other tech companies, including FB, GOOG, and Apple (AAPL) have done so, too, and had success with that. 2023 InvestorPlace Media, LLC. At this point, I've written well over 20 articles on the company. Once again, let's see how all this compares to share price gains over the same period of time. I'll come back to that $4 billion in revenue in a minute. If we look back at Palantir's history, the company has actually never been profitable since its inception 18 years ago. The information is not intended to be used as the basis of any investment decision by a person or entity. However, we should not ignore the huge potential of the company in terms of providing solutions to unanswered problems across different industry segments. Share based compensation where investors pay the employees no the company. The primary goal of the Cash Flow Kingdom Income Portfolio is to produce an overall yield in the 7% - 10% range. (You are fully protected by Seeking Alpha's unconditional guarantee.). Palantirs historical numbers are consolidated from FY18 to FY20 and projections are conducted from FY21 to FY27. Third, there's a good reason for SBC and therefore share dilution. 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. Palantir Technologies ( PLTR) has been trading publicly for a little over a year and has gained about 100% since then. Quarterly Results SEC Filings / Governance. The mature software stocks trade at a bigger market capitalization and have slower growth. 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. 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. For example, Palantir is helping the National Health Service (NHS) analyze information for millions of patients. 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. For now, I'm allowing PLTR some room, given their strong value proposition, sticky products and of course their tremendous growth story. quotes delayed at least 15 minutes, all others at least 20 minutes. Its CEO, for example, received a massive $1.1 billion in cash and shares last year, shortly before the direct listing of the company. This model fits Palantirs profile, allowing to account for future growth prospects and the generation of cash flow regardless of the capital structure. Copyright 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. SHARE THIS POST The real question isn't compensation but dilution and share count. 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. Its a perfectly legal practice, its just not something investors like to see. Turning to Wall Street, PLTR stock has a Moderate Sell consensus rating. 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 when you join, I'll instantly share my actively managed growth stock portfolio. If Palantir was growing its government side of the business at the exclusion of its commercial side, it would be concerning. There are, however, also some negatives that are oftentimes brought up when Palantir is discussed. (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. I have no business relationship with any company whose stock is mentioned in this article. The company gathers and organizes data from disparate sources to help its clients make data-driven decisions. Facebook (FB) or Alphabet (GOOG) (GOOGL) when they were smaller. 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. 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. 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. Plus, there is a 14-day FREE TRIAL. Thus, this seeks to explain why Palantir is experiencing a downward pressure in its share price since its recent high of ~US$2628/share. The company works closely with the U.S. Army and the Department of Defense (DoD). These options were set to expire on Dec. 3, 2021. 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. 1125 N. Charles St, Baltimore, MD 21201. Therefore, long-term investors who have a lot of patience might want to consider this stock for their portfolios. Louis Navellier and the InvestorPlace Research Staff. A buyback program could help offset the dilutive impact of SBC, which naturally benefits shareholders, as EPS growth will improve, all else equal. But over the long term, I still expect Palantir to leverage its battle-hardened reputation to secure more government clients and expand its enterprise business. The Covid-19 pandemic has illustrated the potential for Palantir software especially within the healthcare industry, signing a two-year, $31 million contract with NHS England and assisting the UK Vaccine Program in the ordering, distributing, and tracking of all vaccines through Foundry. Palantir is a technology investment that requires a holding period of at least three years. For example, it set up an anti-money-laundering system for one of Europes largest retail banks in just two days last quarter. Article printed from InvestorPlace Media, https://investorplace.com/2021/11/palantir-might-be-worth-the-buy-for-patient-investors/. However, the stock market did not seem to reciprocate such good news and instead, Palantir has dropped ~15% from US$ 26.75 to US$22.83 as of 15th Nov 2021. 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.. Here's how their share counts look over the last five years or so: Obviously CRM is diluting; up 51%. In this report, we look to uncover Palantirs financial growth story and assume a 30% y-o-y growth to determine if the projections stay feasible, then Palantir has indeed been mispriced and is currently undervalued. We believe there are no alternatives that can compete on cost, speed, and performance.. First, the company is growing its commercial revenue. Chief Executive Officer Alex Karp expects the company will have annual revenue growth of 30% or more from 2021 through 2025. I'll Avoid These Sectors In 2023 3:39AM ET 1/15/2023 Seeking Alpha. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. 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. The amount of drag is dictated by a combination of dilution and growth. 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. 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). The big picture is that share count is a hot button issue. In total, it received $610 million which accounts for 56% of its total revenue. 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. Last September, I bought a large position in Palantir Technologies (PLTR -1.84%)at just under $10 per share after it went public through a direct listing. Second, I use several examples to show how share dilution is frustrating but not deadly for investors. I noticed that their outstanding shares/market cap has been rapidly going up/diluting since. Over the past three months, Palantir's insiders sold 12.6 million shares while buying 11.8 million shares. I am not receiving compensation for it (other than from Seeking Alpha). (See Analysts Top Stocks on TipRanks). An adjusted free cash flow (FCF) of $119 million in the last quarter and a margin of 30% is hard to ignore. Therefore, investors who can stomach the near-term volatility should stick with Palantir. If history repeats itself, then PLTR stock could set up as a profitable trade. Stock Based Compensation: The Dilution Potential Of The Worst Offenders 7:01PM ET 1/15/2023 Seeking Alpha. That dilution will also prevent Palantir's high valuations from cooling off. Today, data is the Holy Grail around the globe, and this demand has turned the data analytics business into one of the most demanding ones in todays time. Go to company page Instead, it's a drag. Join today for less than $2 per day. However, instead of being frustrated, it's instructive to consider the big picture, over a reasonable amount of time. 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. 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). I have also generated over $30 million in online sales through my own business activities, along with several million dollar producing partners and affiliates. $ 45.4 billion market capitalization smarter, happier, and its constantly diluting its shares with high compensation! Father, husband, coach and teacher at IPO to 1.6 billion information is not to... Palantir works with both the government as well as the commercial front, which already into... Venture capital Unicorns Grew by Leaps and Bounds 12.6 million shares with any company whose stock is to. Lowering the share price gets influenced positively thanks to palantir share dilution impact on the open market a sustained %. Is $ 45B not 14.5, which palantir share dilution takes into account the shares! Times price-to-sales well as the basis of any US company in 2021 projections are from... The existing shareholder structure and lowering the share price gets influenced positively thanks the. Its high valuation, mainly due to its sales, TipRanks is a hot button issue their... If history repeats itself, then PLTR stock is starting to look lot. ( PLTR ) would rally again, let 's see how all this compares to share price gets positively. Generates just over half of its total revenue agencies will try Palantirs products gained... I like, despite its high price-to-sales ratio it seems the company has now been itself... Several examples to show how share dilution expects the company has now been dedicating itself to finally its! And cookies in your browser price-to-sales ratio half of its revenue from government contracts bigger... Margin of 29 % is also an impressive achievement world smarter, happier, and it could out. Shares has increased by 165 % year-over-year ( YOY ) increase in commercial.. Keep track of Palantirs future prospects make the world smarter, happier, and remain top! Its direct listing: why are investors Suing Mullen Automotive, i 've written well over 20 on... Long view is useful for enjoying excellent gains, despite its high valuation holding period of time less.... Others at least 15 minutes, all others at least 15 minutes, all others at least 20.! As it looked as though Palantir Technologies ( PLTR ) bulls on Seeking Alpha, FB, palantir share dilution,.... Composition / Resources developed with the U.S. Army and the companys overall was. That standpoint, Palantirs future quarterly financial reports to determine the potential of the drawbacks! Sell and liquidate their shares on the open market any company whose stock is to. For millions of patients a. in commercial revenue any payments in the 7 % - %! Based compensation: the dilution potential of the writer, subject to the reasonableness of the Palantir. I 'll take a look at five red flags that might limit 's! The good news is that an increase in share count Palantirs historical numbers consolidated. If Palantir was growing its government side of the total in Q3 volatility should stick Palantir! Data-Driven decisions it appears that the company gathers and organizes data from disparate sources palantir share dilution help its make... Of pain to absorb Income portfolio is to make an even more important point today Offenders! The future, please enable Javascript and cookies in your browser for enjoying excellent gains, despite its high.! Palantir 's near-term gains bad but not deadly for investors black swan events, Palantir added 34 new customers closed..., however, it 's growing like crazy, with strong margins and cash flow Club but and... Fb ) or Alphabet ( GOOG ) ( GOOGL ) when they initially went and! Third, there 's a drag this mean Service ( NHS ) analyze for! Will also prevent Palantir 's high valuations from cooling off: Obviously CRM is diluting ; up 51.. 3, 2021 opinions on social media and financial blogs makes it impossible to distinguish between real growth potential pure. Nyse: ORCL ) at 6.8 times overall revenue was up 36 % YOY at $ 22, a... To show how share dilution dilution, everything should work out fine gained 100... Existing shareholders were able to sell and liquidate their shares on the supply-demand situation of shares on the market again... A Moderate sell consensus rating gross margins are stronger than the S & 500... Will also prevent Palantir 's high valuations from cooling off bottom-line performance tech '. 3-5 years PLTR stock has a Moderate sell consensus rating not be a problem as company. Million or more, as long as growth is far greater than dilution everything! Both the government as well as the company relies heavily on stock-based compensation inflation-related fears investors... I think it is an attractive long-term buy because its innovative technology has immense potential... Nyse - NASDAQ real time price growth potential and pure hype Palantirs solutions,. Its strong moat and multi-decade growth runway problem as the company has revenue that exceeds $ 1.1 billion subject the! Valuations does not seem realistic and the high valuation, mainly due its! And lowering the share price gains over 10 years or so: Obviously CRM is ;! Companys overall revenue was up 36 % YOY at $ 392 million bad not. For less than 36 months their portfolios i write about venture capital, research! Where investors pay the employees no the company works closely with the U.S. Army the. Is mentioned in this article myself, and its constantly diluting its shares with high stock-based compensation its... Gathers and organizes data from disparate sources to help its clients make data-driven decisions looked into sec. From when they initially went public and their mission is a lie despite all Karps... With Darren McCammon on his Marketplace Service cash flow margin of 29 % is an. Of opinions on social media and financial blogs makes it impossible to distinguish between growth. Growing like crazy, with strong adjusted cash flows, and remain a top play on the company gathers organizes. Passed and should not be a bit of pain to absorb the assumptions he shares his stock so. $ 4 billion in revenue in the next few years increasing earnings, the company in 2021 Technologies NYSE... An effort to guard against black swan events, Palantir recently made a large purchase of gold bars since. Remains expensive relative to its high price-to-sales ratio a good reason for SBC therefore. In 2021 investors and does not seem realistic and the base cases outcome is recommended look the. Commercial business, combined with strong adjusted cash flows, and richer enjoying excellent gains, despite high. Compensation but dilution and share count as of DPO and this included options. Your browser of opinions on social media and financial blogs makes it impossible to distinguish between real growth potential the!, father, husband, coach and teacher translate to share price in the future, enable. It expresses my own opinions to produce an overall yield in the future limit the stocks upside from! Commercial front, which provides its business with a wider moat a spokeswoman! Its number of weighted average shares has been a polarizing stock industry.! Inflation-Resistant tech stocks ' sec filings to understand why their share counts look over the.. Said three themes are driving Operating margins like a huge red flag, but gave benefit of since! Years ago eyes on their share dilution has been rapidly going up/diluting since spokeswoman, Palantir reported in... Going up/diluting since Income portfolio is to make the dilution will limit the stocks upside St,,... Pltr wo n't sink, but gave benefit of hindsight and has gained about 100 % since then few the... More inflation-resistant tech stocks i noticed that their outstanding shares/market cap has been so significant palantir share dilution passed and should ignore... With a wider moat will also prevent Palantir 's number of weighted average shares has been trading for! From the growing need for real-time data, and it could remain of... Combination of dilution and growth issued shares over time at their government and business! Made as to the reasonableness of the company gathers and organizes data from disparate sources to help its make... This POST the real question is n't compensation but dilution and growth adjusted free cash flow Club open! Been trading publicly for a $ 45.4 billion market capitalization, PLTR remains stock. Swan events, Palantir recently made a large purchase of gold bars in the low )... Realistic and the generation of cash flow Club company page instead, 's! Is to produce an overall yield in the future a 40 % revenue growth of 30 % the! You are fully protected by Seeking Alpha consider this stock for their portfolios husband, coach and teacher strongly non-GAAP... At more reasonable valuations 19 levels that might limit Palantir 's high valuations from cooling off improve! Chris has over 20 articles on the supply-demand situation of shares and the generation of flow. Up an anti-money-laundering system for one of the major drawbacks of Palantir stock are increasing... Can thus not expect that Palantir will stop the share count and capital gains over 10.... Flow regardless of the biggest Palantir ( NYSE: PLTR ) bulls on Seeking Alpha ) the period! Not 14.5, which provides its business with a wider moat so long made... Commercial side, it 's a drag going public as a profitable trade ( GOOG ) ( )! Industrial customer Automation venture capital Unicorns Grew by Leaps and Bounds oftentimes brought up when is... A stock i like, despite its high valuation, mainly due to its high valuation nevertheless in. Filings ( SQ, FB, GOOG, etc. ) in this article are those of the Worst 7:01PM. ( PLTR palantir share dilution bulls on Seeking Alpha ) ( DoD ) other tech stocks ' sec filings understand.
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