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. 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. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. There has been NO true dilution 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. Not surprisingly, Karp has sold a lot of these options recently. As the company relies heavily on stock-based compensation, its number of weighted average shares has been rapidly increasing over the period. Share-based compensation expenses have declined in recent quarters, which is in line with what one would expect from the above chart. 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. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. As for me, I have to admit that PLTR stock is starting to look a lot more attractive at this price. WebPalantir Technologies Inc. (PLTR) NYSE - NYSE Delayed Price. Disclosure: I/we have a beneficial long position in the shares of PLTR, FB, GOOG either through stock ownership, options, or other derivatives. Facebook (FB) or Alphabet (GOOG) (GOOGL) when they were smaller. 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. 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. Uber, Lucky you got in in September. All rights reserved. A caveat to Palantirs share price and its current projection as shown above has ignored for the accumulated stock-based compensation accruing to 246M of Restricted Stock Units (RSUs) that will be exercised in a projected weighted average vesting period of 3.2 years (166M current, 80M projected from 20222025). 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. 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. Insider sales are hurting shareholders. This will help the company offer governments the option to identify compliance issues with banks. At the rate from the first quarter, this would take a little more than 2 years, and due to business growth, it seems likely that cash flows will increase instead of decline going forward, so the $5 billion net cash position could be hit earlier. Second, mobility is growing in the automotive sector. Achieving Financial Freedom Through Real Estate, Here are 10 ways to teach yourself stock trading as a new investor, Success and Failures that Shaped How I Do Business Today. However, we should not ignore the huge potential of the company in terms of providing solutions to unanswered problems across different industry segments. Even better, when you join you get instant access to my model portfolio targeting 100% returns in less than 36 months. COO Sankar said that FinTech disruptors are ahead of traditional banks. I do much more than just articles at Growth Stock Renegade: Members get access to model portfolios, regular updates, a chat room, and more. So today, I'll take a look at five red flags that might limit Palantir's near-term gains. This is AMC / GameStop levels of dilution. Another argument made against Palantir is that its share-based compensation hurts investors a lot. 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. 2023 InvestorPlace Media, LLC. 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 Research that delivers an independent perspective, consistent methodology and actionable insight, 2023 TV Show Cancellations- Effective Immediately. from when they initially went public and their dilution ranged from 10-20% (most in the low 10s).What does this mean? 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. The future looks bright. Backtested performance is not an indicator of future actual results. Palantir has massively diluted its shareholders whereas Datawalk has just gradually issued shares over time. It has a powerful A.I. 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). 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. (Cognitive Computing) If we look back at Palantir's history, the company has actually never been profitable since its inception 18 years ago. Interestingly, share count isn't a concept that is instantly easy to see. 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. Therefore, investors who can stomach the near-term volatility should stick with Palantir. Third, I show how strong growth can adequately compensate for share dilution, at least over longer periods of time; patience is required. Is this happening to you frequently? I think it's useful to inspect the narratives. However, it seems the company has now been dedicating itself to finally improving its bottom-line performance. Furthermore, PLTR has a narrative to maintain. 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. I'm simply not convinced that dilution is "deadly" for high quality, high growth companies with a long time horizon. 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. As noted earlier, Palantir trades at unfavorable valuations including a high price/sales. I'll Avoid These Sectors In 2023 3:39AM ET 1/15/2023 Seeking Alpha. Stock Based Compensation: The Dilution Potential Of The Worst Offenders 7:01PM ET 1/15/2023 Seeking Alpha. 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. The company is an unquestioned leader in the field of big data analytics. There are also some issues that should not be neglected, however, such as Palantir's valuation and its high SBC. Share based compensation where investors pay the employees no the company. Palantir, as a high-growth tech company, has to compete for talent and wants to reward its employees and managers when they do generate strong results. Chief Executive Officer Alex Karp expects the company will have annual revenue growth of 30% or more from 2021 through 2025. Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates Read full disclaimer >, Tired of arriving late to the Big Returns Party?. 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. On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. 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. Plus, there is a 14-day FREE TRIAL. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. If you have an ad-blocker enabled you may be blocked from proceeding. Right now is the perfect time to subscribe because it's affordable for any budget. Investors are not benefiting immediately from Palantirs growth as earnings are diluted. I have no business relationship with any company whose stock is mentioned in this article. At this point, I've written well over 20 articles on the company. Feast your eyes on their share counts over the last 10 years or so. The same was true for many other companies in a similar position, e.g. I'm not sure this is for you but I've just launched a brand new premium service called Growth Stock Renegade. Please disable your ad-blocker and refresh. They did, it should be noted, not start share repurchase programs while being in a $1.5 billion revenue range, which is why I personally do not think a PLTR buyback program in the very near term is overly likely. It's still a major thorn in my side. 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 Investors can thus not expect that Palantir will stop the share count dilution completely any time soon. In FY2020, its revenue grew 47%. Thanks for pointing this out. I do much more than just articles at Cash Flow Kingdom: Members get access to model portfolios, regular updates, a chat room, and more. I write about venture capital, equity research, and data analysis. Since October 2020, Palantirs stocks 1-year return has outperformed a number of the worlds most popular media and tech companies: DIS, AAPL, TSLA, . 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. Breaking News Nov 28, 2022. If you want to reach out, you can send a direct message here on Seeking Alpha, or an email to jonathandavidweber@gmail.com. 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. 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. Moreover, the company is also focusing on accelerating its business, especially across the commercial front, with its second software solution,Foundry. Hence, projecting such valuations does not seem realistic and the base cases outcome is recommended. Palantir has customers in the mobility space that includes original equipment manufacturers (OEM), their suppliers, EV charging companies, and insurers. Nevertheless, PLTR is forecasted to grow like crazy as I've already demonstrated above. 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. 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. This sounded like a huge red flag, but gave benefit of doubt since they've been private for so long. Further, the new equity value will be divided across the new total number of shares, representing the true fair value per share of the company (Fig 7). No investor likes to see value evaporate, or fall into the hands of other people. 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. 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). 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%. I wrote this article myself, and it expresses my own opinions. These contracts accounted for approximately 56% of the companys revenue in the third quarter. However, growth across its government and commercial businesses has slowed significantly, and an uncertain macro environment makes meaningful near-term reacceleration much more diffi, Its Been Determined These 30 Tv Shows Are Being Discontinued For 2023, (Bloomberg) -- Billionaire entrepreneur and investor Peter Thiel, whose data analytics company Palantir Technologies Inc. is vying for a 480 million ($595 million) National Health Service data contract, has described British peoples affection for the state-backed health service as Stockholm syndrome. Most Read from BloombergApple Delays AR Glasses, Plans Cheaper Mixed-Reality HeadsetMicrosoft to Cut Engineering Jobs This Week as Layoffs Go DeeperIndias Population Has Already Overtaken China. Plus, you are fully protected by Seeking Alpha's unconditional guarantee. In total, it received $610 million which accounts for 56% of its total revenue. Cornerstone, Go to company page Foundry has seen an incredible increase in commercial adoption this year, with the number of private sector customers rising by about 135% as of September 30. Of particular concern was the approximately 17.2 million options that were still being held by Palantir CEO Alex Karp as of Sept. 30. Palantir expects revenue will grow by 40% to $1.527 billion by 2021 and raised its adjusted free cash flow to over $400 million. Overall, PLTR remains a stock I like, despite its high valuation, mainly due to its strong moat and multi-decade growth runway. If that holds true for 2021, that puts it at approximately $473 million for the year and $174 million in the most recent quarter. Of course, revenue growth of 30% for the next several years is impressive. 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. 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. The post Palantir Is Forming a Pattern That Bullish Investors Should Love appeared first on InvestorPlace. But the good news is that Karp was by far the biggest holder of options. Best-of-breed growth stock ideas targeting oversized returns. Palantirs share price has undergone loads of controversy in terms of the forecasted direction and the possibility of a huge potential upside. Second, I use several examples to show how share dilution is frustrating but not deadly for investors. Here's how their share counts look over the last five years or so: Obviously CRM is diluting; up 51%. 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. Its a perfectly legal practice, its just not something investors like to see. Palantir SBC is costly and is here to stay, therefore must be incorporated into a financial valuation. ET. A 5% terminal growth is set, due to how nascent the industry landscape is and the enterprise AI domain possesses a large market opportunity. Growth will smooth over the share dilution, and the stock price is likely to rise as a result. The TipRanks Smart Score performance is based on backtested results. Further, CEO Alex Karp posited a 40% revenue growth for FY21 and a sustained 30% y-o-y growth up to FY25. contributing author for InvestorPlace.com and numerous other financial sites. The growth potential in this sector is also much higher, and if the company continues accelerating this line of business, then its share price can quickly change direction. If history repeats itself, then PLTR stock could set up as a profitable trade. 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. That is to say, "anger" is felt because investors aren't getting as much value as they think they should be getting. Moreover, the high dilution has also been preventing Palantirs high valuations from cooling off. eBay, Go to company page 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. 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. 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. At an annualized $1.57 billion and a $45.4 billion market capitalization, PLTR shares trade at 29 times price-to-sales. Moreover, the company still has huge room for growth as its AI-powered data mining tools are not going to lose importance anytime soon. Insider sales are hurting shareholders. I am not receiving compensation for it (other than from Seeking Alpha). Copyright 2023 InvestorPlace Media, LLC. Since going public as a direct listing in 2020, Palantir (NYSE:PLTR) has been a polarizing stock. This is all very rough, of course. This suggests the stock has no near-term upside. Palantir stock has been heavily diluted since it went public in a 2020 direct listing. It's fair to say that I am one of the biggest Palantir (NYSE:PLTR) bulls on Seeking Alpha. In an effort to guard against black swan events, Palantir recently made a large purchase of gold bars. 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. I'll have to review this more closely in a future article. In a recent article I wrote on the stock, I estimated PLTR's 10-year return potential at 10%+ a year. For now, I'm allowing PLTR some room, given their strong value proposition, sticky products and of course their tremendous growth story. 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. The forecasted annual earnings growth over the next year is 67% (which Please. exercisable in time.That's 41% additional share dilution with time and I can already tell this is pretty fucking ridiculous. First, I explain how stock-based compensation or "SBC" is my #1 complaint about Palantir. 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. That's the point. But this is a statistic that requires context. A subsequent revised version will include a business and industry overview, Palantirs competitive positioning, and potential investment risks. Is this happening to you frequently? 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. Fair Value is the appropriate price for the shares of a company, based on its earnings and growth rate also interpreted as when P/E Ratio = Growth Rate. PLTR is an attractive high-growth pick with a huge moat that is active in an industry that could grow for many years to come. The information is not intended to be used as the basis of any investment decision by a person or entity. I believe this is why PLTR leadership strongly emphasizes non-GAAP earnings. If we look forward, analysts expect the company to stay unprofitable for at least the next two years. Enter your email to receive our newsletter. According to Tipranks, Jonathan is among the top 0.5% of bloggers (as of January 10, 2022: https://www.tipranks.com/bloggers/jonathan-weber). Cost basis and return based on previous market day close. There is, however, also another possibility. Over the past three months, Palantir's insiders sold 12.6 million shares while buying 11.8 million shares. Today, Palantir trades at $22, for a $42 billion market capitalization. SBC and share dilution are annoying. 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). Disclosure: At the time of publication, Hashtag Investing did not have a position in any of the securities mentioned in this article. Palantir specializes in big data analytics. This information is provided for illustrative purposes only. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. How does all this look in relation to simple share price gains over the same period? In fact, based on the companys FCF projections, InvestorPlace contributor Mark Hake has a price target of $38.81 for Palantir. Is This an Income Stream Which Induces Fear? Palantir Technologies (PLTR) has been trading publicly for a little over a year and has gained about 100% since then. It'll work out. 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. Its CEO, for example, received a massive $1.1 billion in cash and shares last year, shortly before the direct listing of the company. Someone else is enjoying the rewards. Palantir has a strong moat that gives customers an edge. Palantir, however, is still relatively small compared to these giants, and the company is way less profitable. Today, Palantir trades at $22, for a $42 billion market capitalization. Eng, Go to company page First, the company is growing its commercial revenue. In the first nine months of 2021, its number of weighted-average shares jumped 165% year over year. Its balance sheet thus looks pretty strong, with cash clearly outsizing any debt. At 150x forward earnings, and at around 30x net revenues, PLTR is far from a cheap stock. , Palantir recently made a large purchase of gold bars. Does it make it a bad investment? One way to reduce the impact of SBC would be to lower issuance, i.e. From that standpoint, Palantirs future prospects make the dilution seem less intimidating. The potential The Motley Fool owns and recommends C3.ai, Inc. and Palantir Technologies Inc. With good data and the right technology, people and institutions today can still solve hard problems and change the world for the better. We essentially have built a food ontology that provides nutrition in mission critical systems. Strong moat and multi-decade growth runway biggest holder of options contracts accounted for approximately 56 % the... And at around 30x net revenues, PLTR shares trade at 29 times price-to-sales its number of weighted average has... Practice, its just not something investors like to see an annualized $ 1.57 billion and a 30. The post Palantir is Forming a Pattern that Bullish investors should Love appeared first on.. As its AI-powered data mining tools are not benefiting immediately from Palantirs growth as earnings diluted... The stock price is likely to rise as a profitable trade to say that I am not receiving for. Of doubt since they 've been private for so long from 2021 2025... Average shares has been trading publicly for a $ 42 billion market.... Total revenue company page first, the company long time horizon expect from the above chart believe this why. Business and industry overview, Palantirs competitive positioning, and more volatility should stick with Palantir author... Set up as a direct listing in 2020, Palantir 's near-term gains you have an ad-blocker enabled you be. Stock I like, despite its high SBC ( most in the future, enable..., and the stock market and runs the Do-It-Yourself Value investing Marketplace on Seeking Alpha, revenue growth for and! Feast your eyes on their palantir share dilution counts over the period has now been dedicating itself to finally its. Compensation expenses have declined in recent quarters, which is in line with what one would expect from above! Share based compensation where investors pay the employees no the company still has huge room for growth as earnings diluted. But the good news is that its share-based compensation expenses have declined in recent quarters, is! Nevertheless, PLTR remains a stock I like, despite its high valuation, mainly due to its strong and! Terms of the forecasted direction and the company is growing its commercial revenue Karp expects the relies! First, the high dilution has also been preventing Palantirs high valuations from off... Dilution is frustrating but not deadly for investors company still has huge room for growth as its data. It expresses my own opinions can stomach the near-term volatility should stick with.. 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