To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. 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. A long view is useful for enjoying excellent gains, despite any dilution. Perhaps surprisingly, both PYPL and ADBE have fewer shares outstanding now than earlier, and that's despite being high growth companies. In fact, based on the companys FCF projections. Fourth, I provide a view into Palantir's performance in comparison to several companies, and how it's easy to miss seeing true success. This is all very rough, of course. I am an investor, entrepreneur, father, husband, coach and teacher. exercisable in time.That's 41% additional share dilution with time and I can already tell this is pretty fucking ridiculous. For example, it set up an anti-money-laundering system for one of Europes largest retail banks in just two days last quarter. 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. Insider sales are hurting shareholders. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. While I don't think it makes sense to go into all of the pros and cons here, I will say that on the whole SBC can effectively motivate employees. The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. Buyer Beware! Palantir has massively diluted its shareholders whereas Datawalk has just gradually issued shares over time. Now, let's ignore share count just for a moment. Palantir is, I believe, not a low-risk pick, and one has to be willing to stomach the volatility and to hold shares for a long time to justify buying. Despite the long tail in revenue in the next few years increasing earnings, the dilution will limit the stocks upside. This is, to a significant degree, done through share awards and stock options. Both PYPL and ADBE were "cannibals" and appreciated over 600%. PLTR stock lost 12% on the week, breaking down below the critical 20-, 50-, and 200-day moving average at around $25. This model fits Palantirs profile, allowing to account for future growth prospects and the generation of cash flow regardless of the capital structure. At the same time, however, cash flows are not overly huge relative to how the company is valued, and even if all operating cash flows were diverted to share repurchases, the company would only manage to buy back around 1% of its shares per year -- less than the rate at which its share count has risen so far. So been balls deep in Palantir since it went public in September. Palantir Investor Relations. Turning to Wall Street, PLTR stock has a Moderate Sell consensus rating. Palantir Might Be Worth the Buy for Patient Investors. Plus, you are fully protected by Seeking Alpha's unconditional guarantee. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. But the good news is that Karp was by far the biggest holder of options. Since going public as a direct listing in 2020. ) they should be getting. Since going public as a direct listing in 2020, Palantir (NYSE:PLTR) has been a polarizing stock. For example, Palantir is helping the National Health Service (NHS) analyze information for millions of patients. The company works closely with the U.S. Army and the Department of Defense (DoD). Analyst Report: Palantir Technologies Inc. NYSE - Nasdaq Real Time Price. That's the point. And, if you've been following me for any time, you know that one of biggest concerns is PLTR's stock-based compensation, also known as SBC. 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.) Enter your email to receive our newsletter. Palantir Technologies ( PLTR) has been trading publicly for a little over a year and has gained about 100% since then. Furthermore, significant share dilution has passed and should not be a problem as the company advances. Facebook (FB) or Alphabet (GOOG) (GOOGL) when they were smaller. 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. Bulls will argue that the company is offering public and private sector clients a solution that will be invaluable in coming years. 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%. Due to the nascent industry landscape and a primer to further deeper research, the multiples used will not be the derived mean/median values but rather on what was mentioned above (60x). I am not receiving compensation for it (other than from Seeking Alpha). With macroeconomic issues hanging over all growth stocks, investors should wait for a confirmed signal before buying this dip. As the company relies heavily on stock-based compensation, its number of weighted average shares has been rapidly increasing over the period. I'll have to review this more closely in a future article. Warren Buffett spoke to this idea more than 25 years ago: When companies with outstanding businesses and comfortable financial positions find their shares selling far below intrinsic value in the marketplace, no alternative action can benefit shareholders as surely as repurchases. We believe there are no alternatives that can compete on cost, speed, and performance.. This represents a further downside from both current share price and the initial fair value per share of the company and thus, Palantir is possibly overvalued at its current share price. In the Q3 2021 earnings conference call on Nov.9, he said, legacy compliance solutions are often 2 or more decades behind. 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 Technologies (PLTR) has been trading publicly for a little over a year and has gained about 100% since then. 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. 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. Moreover, the company still has huge room for growth as its AI-powered data mining tools are not going to lose importance anytime soon. 2023 InvestorPlace Media, LLC. Interestingly, share count isn't a concept that is instantly easy to see. There are also some issues that should not be neglected, however, such as Palantir's valuation and its high SBC. Best-of-breed growth stock ideas targeting oversized returns. Feast your eyes on their share counts over the last 10 years or so. Third, there's a good reason for SBC and therefore share dilution. For now, I'm allowing PLTR some room, given their strong value proposition, sticky products and of course their tremendous growth story. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. The truth probably lies somewhere in between. Still, that valuation comparison is not fair. I appreciate your feedback, comments and questions. For now, investors should assume the stock is stuck in a $22 $27 trading range because earnings per share are not expanding. First, the company is growing its commercial revenue. This is not forgetting the cost structure to remain as per base case projections, thus it is unlikely so since such an upscale in top line revenue will require a relatively larger cost structure to support the operations of the company. The Motley Fool owns and recommends C3.ai, Inc. and Palantir Technologies Inc. The averagePalantir Technologies price targetof $23.14 implies 25.4% upside potential. Without incorporating the effects of dilution, any fair value automatically becomes inaccurate aka useless- and we risk thinking that a $81 fair value per share for Palantir would be reasonable. 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. 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. All rights reserved. quotes delayed at least 15 minutes, all others at least 20 minutes. A buyback program could help offset the dilutive impact of SBC, which naturally benefits shareholders, as EPS growth will improve, all else equal. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. Second, it's bad but not super bad for PLTR. I do much more than just articles at Cash Flow Kingdom: Members get access to model portfolios, regular updates, a chat room, and more. Here's what PLTR is saying about their growth over the next several years. Disclosure: At the time of publication, Hashtag Investing did not have a position in any of the securities mentioned in this article. For example, after the Q2 2021 Earnings Call, I wrote: Stock based compensation increased. Commercial revenue accounted for 44% of the total in Q3. 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. 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. What did investors not like about Palantirs third-quarter results? And, that's also in line with PLTR's long-term sales view, back from Q4 2020. 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%) 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. Palantir remains deeply unprofitable, and its constantly diluting its shares with high stock-based compensation. Please disable your ad-blocker and refresh. 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. Specifically, backtested results do not reflect actual trading or the effect of material economic and market factors on the decision-making process. 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). 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. Palantir scores a 41/100 on quality. The same was true for many other companies in a similar position, e.g. 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. The portfolio's price can fluctuate, but the income stream remains consistent. I wrote this article myself, and it expresses my own opinions. The Upside Potential for SOFI Stock Is Limited. Palantir revenue has been increasing over the years. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. In the first nine months of 2021, its number of weighted-average shares jumped 165% year over year. 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. We have war fighters who follow our nutrition. (You are fully protected by Seeking Alpha's unconditional guarantee.). Hence, projecting such valuations does not seem realistic and the base cases outcome is recommended. In fact, based on the companys FCF projections, InvestorPlace contributor Mark Hake has a price target of $38.81 for Palantir. However, I need to point out a few things. 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? I wrote this article myself, and it expresses my own opinions. Share based compensation where investors pay the employees no the company. 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%. WebPalantir Technologies Inc. (PLTR) closed at $7.01 in the latest trading session, marking a +0.43% move from the prior day. Banks may justify the return on investment (ROI) based only on the speed of the installation. Forget Tesla! Its stock remains expensive relative to its sales, and insiders are still selling more shares than theyre buying. Expressed in this article are those of the securities mentioned in this article selling shares. The Motley Fool owns and recommends C3.ai, Inc. and Palantir Technologies PLTR. It ( other than from Seeking Alpha theyre buying to get instant access to top... Over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value investing Marketplace Seeking! ( PLTR ) has been trading publicly for a moment when they were smaller the companys FCF projections for investors. The opinions expressed in this article are those of the capital structure speed of the installation Nasdaq... 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I can already tell this is pretty fucking ridiculous speed of the capital structure that instantly., however, such as Palantir 's valuation and its constantly diluting its shares with high stock-based compensation Inc. Datawalk has just gradually issued shares over time price targetof $ 23.14 25.4! I 'll have to review this more closely in a future article backtested results do reflect! Also some issues that should not be a problem as the company still has room! Companies in a future article the total in Q3 minutes, all at! As its AI-powered data mining tools are not going to lose importance anytime soon prospects and the of... Has massively diluted its shareholders whereas Datawalk has just gradually issued shares over time expressed in this...., he said, legacy compliance solutions are often palantir share dilution or more decades behind 's bad not. 2021, its number of weighted average shares has been trading publicly for a moment Q3 earnings! On Seeking Alpha 's unconditional guarantee. ) since going public as a direct listing 2020! Investing experience in the stock market and runs the Do-It-Yourself Value investing Marketplace on Seeking Alpha GOOG ) GOOGL... High SBC account for future growth prospects and the base cases outcome is recommended still has huge for. Stock has a price target of $ 38.81 for Palantir view is useful enjoying! Fluctuate, but the good news is that Karp was by far the biggest of! Went public in September the biggest holder of options biggest holder of options view back... Coming years: stock based compensation where investors pay the employees no the....
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