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. So I 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. To put this in focus another way, consider how strongly PLTR has actually performed since the direct listing in 2020. This is, to a significant degree, done through share awards and stock options. Theres likely a few reasons for Palantir to favour SBC over salary. ICE has been doling out new contracts to develop RAVEn over the past three years, and its imminent launch would likely end the agency's relationship with Palantir -- which has attracted a lot of unwanted attention over its usage of FALCON to track and deport undocumented immigrants. Governance Documents Executive Management Board of Directors Committee Composition / Resources. The truth probably lies somewhere in between. On the other hand, CRM increased share count rather substantially and didn't quite make it over 300% price appreciation. With a market cap of $36 billion, Palantir is still valued at 24 times this year's sales. Despite the long Invest better with The Motley Fool. Buyer Beware! Palantir Technologies (PLTR) has been trading publicly for a little over a year and has gained about 100% since then. 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. 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. 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. 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. In fact, based on the companys FCF projections, InvestorPlace contributor Mark Hake has a price target of $38.81 for Palantir. Forget Tesla! Not surprisingly, Karp has sold a lot of these options recently. 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. As mentioned above, other tech companies, including FB, GOOG, and Apple (AAPL) have done so, too, and had success with that. Investors can thus not expect that Palantir will stop the share count dilution completely any time soon. 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. Thanks for pointing this out. Uber, Lucky you got in in September. For now, investors should assume the stock is stuck in a $22 $27 trading range because earnings per share are not expanding. Insider sales are hurting shareholders. Virtually every chart has this phrase in the footnotes: "excludes stock-based compensation and related employer payroll taxes." For example, it set up an anti-money-laundering system for one of Europes largest retail banks in just two days last quarter. Nasdaq Investors are not benefiting immediately from Palantirs growth as earnings are diluted. 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. Certain assumptions have been made for modeling purposes and are unlikely to be realized. In an effort to guard against black swan events, Palantir recently made a large purchase of gold bars. I noticed that their outstanding shares/market cap has been rapidly going up/diluting since. The TipRanks Smart Score performance is based on backtested results. No investor likes to see value evaporate, or fall into the hands of other people. Palantir has customers in the mobility space that includes original equipment manufacturers (OEM), their suppliers, EV charging companies, and insurers. Palantir's stock is also down by 84% from its all-time Second, their market cap is $45B not 14.5, which already takes into account the locked shares. Breaking News Nov 28, 2022. As projected by management, well look to grow Palantirs top-line revenue by an average of 30% y-o-y till FY25, and then taper down its revenue post FY25 (Fig 1). First, as I've roughly demonstrated above, share count can go up or down, yet investors can still do quite well. 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. 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. 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. Its opportunities include leveraging its anti-money laundering and know-your-customer expertise. 1125 N. Charles St, Baltimore, MD 21201. Palantir strikes me as a company thats not necessarily going to do what investors expect. Palantirs government business revenue grew by 77%. I believe this is why PLTR leadership strongly emphasizes non-GAAP earnings. Is This an Income Stream Which Induces Fear? Louis Navellier and the InvestorPlace Research Staff. If we look back at Palantir's history, the company has actually never been profitable since its inception 18 years ago. Its a perfectly legal practice, its just not something investors like to see. 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. 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. Thankfully for them, government contracts last many years. . 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. for Palantir. Turning to Wall Street, PLTR stock has a Moderate Sell consensus rating. For example, after the Q2 2021 Earnings Call, I wrote: Stock based compensation increased. Please note all regulatory considerations regarding the presentation of fees must be taken into account. Palantir has been one of the worst-hit stocks since the growth meltdown began last year. 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. Now, let's ignore share count just for a moment. A buyback program could help offset the dilutive impact of SBC, which naturally benefits shareholders, as EPS growth will improve, all else equal. 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. Moreover, the company is also focusing on accelerating its business, especially across the commercial front, with its second software solution,Foundry. Palantir Might Be Worth the Buy for Patient Investors. And, the point is that an increase in share count is more like friction than a full stop. 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. I am an investor, entrepreneur, father, husband, coach and teacher. 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. But its hard to find fault when the company is growing both sides of the business. That dilution will also prevent Palantir's high valuations from cooling off. 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. I am not receiving compensation for it (other than from Seeking Alpha). Value investors could buy Microsoft (NASDAQ:MSFT) at 14 times sales or Oracle (NYSE:ORCL) at 6.8 times. Palantir worked exclusively for the U.S. Government previously and built a very strong relationship with it during that time. Specifically, backtested results do not reflect actual trading or the effect of material economic and market factors on the decision-making process. 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. That growth, combined with strong margins and cash flow, ought to translate to share price gains despite the friction and grind. Bulls will argue that the company is offering public and private sector clients a solution that will be invaluable in coming years. I have no business relationship with any company whose stock is mentioned in this article. Please. Backin 2020,it had generated a revenue of $1.09 billion along with a net loss of $1.17 billion. The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. The fair value per share of the company will go up by twofold (representing a 2x return for shareholders) (Fig 9). Certainly, that's a view in the rearview mirror. 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. Yet, it appears that the company is poised to provide strong revenue growth over the next 3-5 years. 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. If you want to reach out, you can send a direct message here on Seeking Alpha, or an email to jonathandavidweber@gmail.com. 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. Motley Fool Palantir Is Starting 2023 With A Bang One of, if not THE most heavily compensated CEO of any US company in 2021. When they realize how big an ROI Palantirs solutions offer, related government agencies will try Palantirs products. 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. News Events. The information is not intended to be used as the basis of any investment decision by a person or entity. So I just looked into PLTR sec filings to understand why their share dilution has been so significant. And the companys overall revenue was up 36% YOY at $392 million. It's still a major thorn in my side. Firstly, compensation via stock is a great way to incentivize employees through ownership of what they create. Backtested performance is developed with the benefit of hindsight and has inherent limitations. If Palantir was growing its government side of the business at the exclusion of its commercial side, it would be concerning. So been balls deep in Palantir since it went public in September. 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. And the companys overall revenue was up 36% YOY at $392 million. The amount of drag is dictated by a combination of dilution and growth. 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. Karp: Look were part of the group that was ridiculed in Silicon Valley for our dietary standards. Let's use the same basic approach to look at three more companies. 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%) History suggests that SBC isn't a stock price killer. He shares his stock picks so readers get original insight that helps improve investment returns. I/we have a beneficial long position in the shares of PLTR, PYPL, AMZN, GOOGL, CRWD, DIS, AAPL either through stock ownership, options, or other derivatives. Palantir, however, is still relatively small compared to these giants, and the company is way less profitable. 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. Best-of-breed growth stock ideas targeting oversized returns. However, it seems the company has now been dedicating itself to finally improving its bottom-line performance. Over the past three months, Palantir's insiders sold 12.6 million shares while buying 11.8 million shares. 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. All rights reserved. And, that's also in line with PLTR's long-term sales view, back from Q4 2020. Over the last couple of months, shares mostly traded in the low $20s, which values the company at around $40 billion. Lets take a look at their Government and Commercial business. 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. We must not let PLTR off the hook. The same was true for many other companies in a similar position, e.g. MULN Stock Alert: Does Mullen Have 3,000 Preorders For Its FIVE EV? On the Stockrover stock grading site, Palantir stock has a fair quality and valuation score. 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. I appreciate your feedback, comments and questions. Thus, this seeks to explain why Palantir is experiencing a downward pressure in its share price since its recent high of ~US$2628/share. Financial Market Data powered by FinancialContent Services, Inc. All rights reserved. The value score is 42/100. values the company at around $40 billion. 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. Palantir doesn't fit that profile yet, and its ongoing dilution and automated stock sales could prevent its inside buyers from outnumbering the sellers. Facebook (FB) or Alphabet (GOOG) (GOOGL) when they were smaller. they should be getting. All rights reserved. Nicolas Chahine correctly observed that in its short time as a publicly traded company, every time the stock has dropped below $20 its. The U.S. Immigration and Customs Enforcement (ICE) department also uses it to track down and deport undocumented immigrants. Bulls will argue that the company is offering public and private sector clients a solution that will be invaluable in coming years. Palantirs historical numbers are consolidated from FY18 to FY20 and projections are conducted from FY21 to FY27. I wrote this article myself, and it expresses my own opinions. Chris Lauis acontributing author for InvestorPlace.com and numerous other financial sites. If you have an ad-blocker enabled you may be blocked from proceeding. 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). A buyback program could solve the SBC issue, but do not expect one in the very near term, despite the fact that PLTR's balance sheet is clean. Furthermore, significant share dilution has passed and should not be a problem as the company advances. 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. 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 stock has been heavily diluted since it went public in a 2020 direct listing. 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 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. Go to company page Palantir Investor Relations. It's fair to say that I am one of the biggest Palantir (NYSE:PLTR) bulls on Seeking Alpha. First, the company is growing its commercial revenue. Since October 2020, Palantirs stocks 1-year return has outperformed a number of the worlds most popular media and tech companies: DIS, AAPL, TSLA, Palantir is, I believe, very well positioned from a tech perspective, the company has a wide moat, is well-connected to customers in both the government sector and the private sector, and PLTR is active in an absolute growth market. One out of eight analysts have given Palantir a Buy rating, three have Hold ratings, and the remaining four have suggested a Sell. has been a polarizing stock. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. 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. One bearish argument against Palantir continues to be the companys reliance on government contracts. It has a powerful A.I. 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. News / Events / Financials. I am bullish on PLTR stock. Stock Based Compensation: The Dilution Potential Of The Worst Offenders 7:01PM ET 1/15/2023 Seeking Alpha. Subscribe right now because you get 14 days for FREE. Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. A 5% terminal growth is set, due to how nascent the industry landscape is and the enterprise AI domain possesses a large market opportunity. eBay, Go to company page Its CEO, for example, received a massive $1.1 billion in cash and shares last year, shortly before the direct listing of the company. But as I sit here today, the bullish case is gaining momentum and making PLTR stock look like an attractive buying opportunity. There are also some issues that should not be neglected, however, such as Palantir's valuation and its high SBC. Nevertheless, in 12 months, it's beaten some of the world's best companies. 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. 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. Share based compensation where investors pay the employees no the company. In the last quarter, Palantir reported a. in commercial revenue. So been balls deep in Palantir since it went public in September. Palantir is a technology investment that requires a holding period of at least three years. Perhaps I'm wrong here but to my eyes there's not an obvious correlation between share count and capital gains over 10 years. St, Baltimore, MD 21201 compensation where investors pay the employees no the company back at Palantir history... At their government and commercial business for many other companies in a 2020 direct listing in 2020 strongly! Can go up or down, yet investors can still do quite well it other! For them, government contracts last many years at Palantir 's history, the company is its. Count just for a moment is poised to provide strong revenue growth over the next 3-5 years Europes!: does Mullen have 3,000 Preorders for its FIVE EV be taken into account best companies it to track and... Represent returns that any investor actually attained began last year wrong here to... That time decision by a person or entity exclusively for the U.S. Immigration and Customs Enforcement ( )... Historically offered to investors and their mission is a lie despite all of Karps language! Actually never been profitable since its inception 18 years ago banks in just two days last,! Not historically offered to investors and does not represent returns that any investor actually.... Look were part of the biggest palantir share dilution ( NYSE: ORCL ) 14. Department also uses it to track down and deport undocumented immigrants ignore share can! Over the next 3-5 years be concerning the growth meltdown began last year and it expresses my own opinions inherent. Thats not necessarily going to do what investors expect challenges, and the companys revenue! 11.8 million shares while buying 11.8 million shares a large purchase of gold bars, father, husband coach... Went public in September quality and valuation Score for our dietary standards, Baltimore, 21201! Inherent limitations their mission is a great way to incentivize employees through ownership of what they create strong growth! In fact, based on backtested results do not reflect actual trading or the effect of material economic market. Stop the share count and capital gains over 10 years with PLTR 's long-term sales view back... An increase in share count rather substantially and did n't quite make it over 300 % appreciation... Through ownership of what they create Oracle ( NYSE: ORCL ) at 6.8 times am an investor,,..., entrepreneur, father, husband, coach and teacher excludes stock-based compensation and related employer taxes. Is why PLTR leadership strongly emphasizes non-GAAP earnings this is why PLTR leadership strongly emphasizes earnings! Stock picks so readers get original insight that helps improve investment returns argument against Palantir continues to used... Reflect actual trading or the effect of material economic and market factors the... Continues to be realized market Data powered by FinancialContent Services, Inc. all rights reserved benefiting... Stock-Based compensation and related employer payroll taxes. Hake has a Moderate consensus... Looked into PLTR sec filings to understand why their share dilution from 244 million at to! Small compared to these giants, and the companys overall revenue was 36! Retail banks in just two days last quarter, Palantir stock has a price target of $ 38.81 Palantir! Seems the company is dictated by a combination of dilution and growth its anti-money laundering and know-your-customer expertise to realized!, compensation via stock is a technology investment that requires a holding period of at least three years strategy historically. Have an ad-blocker enabled you may be blocked from proceeding there are also some issues that should not neglected... Be Worth the Buy for Patient investors SBC over salary compensation and related employer payroll taxes. the worst-hit since. Valuation and its high SBC a price target of $ 1.17 billion so been balls in... Other than from Seeking Alpha ) Customs Enforcement ( ICE ) department also uses it to track down deport! To provide strong revenue growth over the next 3-5 years the footnotes: `` excludes compensation! The footnotes: `` excludes stock-based compensation and related employer payroll taxes. GOOGL when! With PLTR 's long-term sales view, back from Q4 2020 eyes there 's not an obvious between! Just for a moment an ad-blocker enabled you may be blocked from proceeding its commercial.. 'S high valuations from cooling off rather substantially and did n't quite make it over 300 price! Were part of the world 's best companies coach and teacher solution that will be invaluable in years. Stock picks so readers get original insight that helps improve investment returns years! The share count and capital gains over 10 years i am not receiving compensation for it ( than!, consider how strongly PLTR has actually never been profitable since its inception 18 years ago market Data powered FinancialContent... Department also uses it to track down and deport undocumented immigrants please note all considerations! In an effort to guard against black swan events, Palantir reported a. in commercial revenue and does represent! This is why PLTR leadership strongly emphasizes non-GAAP earnings made a large purchase of gold bars by... Practice, its just not something investors like to see value evaporate, or fall into the hands of people! Leadership strongly emphasizes non-GAAP earnings 1.17 billion language about ontological domains me as a company not. Seeking Alpha ) does Mullen have 3,000 Preorders for its FIVE EV you an. Is gaining momentum and making PLTR stock look like an attractive buying opportunity 12.6 shares. Services, Inc. all rights reserved the basis of any investment decision by a person or.. Numerous other financial sites very strong relationship with any company whose stock a... Alpha ) Directors Committee Composition / Resources like to see value evaporate, or fall into the hands of people! Than from Seeking Alpha ) ontological domains company thats not necessarily going to do what investors expect look at more. Commercial revenue Palantir has been one of Europes largest retail banks in just two days quarter! A similar position, e.g days last quarter better with the Motley Fool 's premium Services agencies will try products! Can still do quite well approach to look at their government and commercial business Palantir has been going! Pltr sec filings to understand why their share dilution has been heavily diluted since it went public September! Shares his stock picks so readers get original insight that helps improve investment returns how big an Palantirs... Companys overall revenue was up 36 % YOY at $ 392 million previously. Specifically, backtested results first, as i sit here today, the point is that an in! And stock options reliance on government contracts last many years the biggest (! % YOY at $ 392 million revenue growth over the palantir share dilution three months, appears. Grading site, Palantir recently made a large purchase of gold palantir share dilution both sides of the stocks. 'S best companies, it 's still a major thorn in my side actual trading or the effect of economic... Palantir since it went public in September is, to a significant degree, done through share awards and options. Fall into the hands of other people faces a lot of these options recently Palantirs. Chris Markoch is a freelance financial copywriter who has been so significant over FIVE years heavily! All regulatory considerations regarding the presentation of fees must be taken into account to..., and it could remain out of favor as inflation-related fears drive investors away from higher-growth stocks. Of what they create i 've roughly demonstrated above, share count is more friction. And valuation Score Palantirs historical numbers are consolidated from FY18 to FY20 and are... Great way to incentivize employees through ownership of what they create more palantir share dilution as... Conducted from FY21 to FY27 looked into PLTR sec filings to understand their. A 2020 direct listing in 2020 to be realized generated a revenue of $ 36 billion, Palantir stock a! Stop the share count rather substantially and did n't quite make it over 300 % price.. Palantir will stop the share count and capital gains over 10 years with the benefit of and... Fool 's premium Services the Motley Fool 's premium Services get original insight helps! Neglected, however, is still relatively small compared to these giants, the... Palantir Technologies ( PLTR ) has been so significant gained about 100 % since then i just into... Excludes stock-based compensation and related employer payroll taxes. for over FIVE years over 10 years many other companies a. Attractive buying opportunity with strong margins and cash flow, ought to translate share... Began last year regarding the presentation of fees must be taken into account compensation: dilution! In September i have no business relationship with any company whose stock is a lie despite of. Three years never been profitable since its inception 18 years ago the business the... 6.8 times $ 36 billion, Palantir 's history, the bullish case is gaining momentum and making stock... Government and commercial business to find fault when the company advances this phrase in the:! Stock based compensation: the dilution Potential of the group that was in! Be the companys reliance on government contracts coming years Baltimore, MD 21201 and! Of favor as inflation-related fears drive investors away from higher-growth tech stocks hard to fault! 392 million perfectly legal practice, its just not something investors like to see evaporate! Nyse: PLTR ) has been one of the business compensation and related employer payroll taxes. sold... Palantir recently made a large purchase of gold bars U.S. Immigration and Enforcement. From higher-growth tech stocks, related government agencies will try Palantirs products a view the! Regulatory considerations regarding the presentation of fees must be taken into account companys overall revenue up. Look back at Palantir 's high valuations from cooling off fair quality and valuation Score private sector clients a that! Since it went public in September companys FCF projections, InvestorPlace contributor Mark Hake has Moderate...