Firstly, compensation via stock is a great way to incentivize employees through ownership of what they create. If you have an ad-blocker enabled you may be blocked from proceeding. The Upside Potential for SOFI Stock Is Limited. The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. 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, these options will eventually be exercised, diluting the existing shareholder structure and lowering the share price in the future. Gross margins are stronger than the S&P 500 average. 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?. Hence, projecting such valuations does not seem realistic and the base cases outcome is recommended. 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 History suggests that SBC isn't a stock price killer. At this point, I've written well over 20 articles on the company. One of, if not THE most heavily compensated CEO of any US company in 2021. 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. they should be getting. News / Events / Financials. for Palantir. 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. eBay, Go to company page Palantir's stock is also down by 84% from its all-time 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.. Proven research methods championed by growth stock investors like Peter Lynch, Richard Koch, and Phil Fisher. In order to pay for share repurchases one has to pay cash, of course, which is why we should take a look into PLTR's balance sheet and cash flow statement: We see that Palantir has a net cash position of $2.1 billion, not accounting for restricted cash. 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 Someone else is enjoying the rewards. Insider sales are hurting shareholders. According to Tipranks, Jonathan is among the top 0.5% of bloggers (as of January 10, 2022: https://www.tipranks.com/bloggers/jonathan-weber). Chief Executive Officer Alex Karp expects the company will have annual revenue growth of 30% or more from 2021 through 2025. These contracts accounted for approximately 56% of the companys revenue in the third quarter. It's fair to say that I am one of the biggest Palantir (NYSE:PLTR) bulls on Seeking Alpha. Over the past three months, Palantir's insiders sold 12.6 million shares while buying 11.8 million shares. Turning to Wall Street, PLTR stock has a Moderate Sell consensus rating. In the Q3 2021 earnings conference call on Nov.9, he said, legacy compliance solutions are often 2 or more decades behind. Breaking News Nov 28, 2022. The amount of drag is dictated by a combination of dilution and growth. In a recent article I wrote on the stock, I estimated PLTR's 10-year return potential at 10%+ a year. Cornerstone, Go to company page Palantir is a technology investment that requires a holding period of at least three years. Palantir has been one of the worst-hit stocks since the growth meltdown began last year. Palantirs customers in healthcare and government may potentially expand their technology spending budgets. 7 Top-Rated Energy Stocks to Fill Up Your Portfolio. Palantir stock has been heavily diluted since it went public in a 2020 direct listing. The company has an admirable competitive position in providing data services to Federal agencies, but is diluting itself through share-based compensation. Since going public, Palantir has increased its number of shares outstanding by 108%. The company gathers and organizes data from disparate sources to help its clients make data-driven decisions. 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. Please. PLTR is sitting around P/S of 30 which seems somewhat reasonable, at least in relation to other hot, high growth stocks. 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. Actual performance may differ significantly from backtested performance. To put this in focus another way, consider how strongly PLTR has actually performed since the direct listing in 2020. Bulls will argue that the company is offering public and private sector clients a solution that will be invaluable in coming years. Now that shares are down slightly, Palantir is a stock to consider again. MULN Stock Alert: Does Mullen Have 3,000 Preorders For Its FIVE EV? One bearish argument against Palantir continues to be the companys reliance on government contracts. Palantir remains deeply unprofitable, and its constantly diluting its shares with high stock-based compensation. With good data and the right technology, people and institutions today can still solve hard problems and change the world for the better. But as I sit here today, the bullish case is gaining momentum and making PLTR stock look like an attractive buying opportunity. From that standpoint, Palantirs future prospects make the dilution seem less intimidating. It appears to me that PLTR's growth will overcome the SBC problem over the coming 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. 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. Further, backtesting allows the security selection methodology to be adjusted until past returns are maximized. 18 of those deals were valued at $10 million or more. Share based compensation where investors pay the employees no the company. 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. Thecompanys targetof generating more than 30% sales growth annually gives ammo to its high price-to-sales ratio. If you have an ad-blocker enabled you may be blocked from proceeding. 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). However, I need to point out a few things. Buyer Beware! 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. All rights reserved. A sensitivity analysis is applied to Palantir to weigh out different possibilities on where the share priced will be headed towards, depending on the scenario and the type of valuation methodology employed. To make the world smarter, happier, and richer. The fair value per share of the company will go up by twofold (representing a 2x return for shareholders) (Fig 9). Its a perfectly legal practice, its just not something investors like to see. Subscribe right now because you get 14 days for FREE. 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). Virtually every chart has this phrase in the footnotes: "excludes stock-based compensation and related employer payroll taxes." 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. As for me, I have to admit that PLTR stock is starting to look a lot more attractive at this price. 1125 N. Charles St, Baltimore, MD 21201. Today, Palantir trades at $22, for a $42 billion market capitalization. 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. 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. Bulls will argue that the company is offering public and private sector clients a solution that will be invaluable in coming years. SBC and share dilution are annoying. 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. The Investment Community where "Cash Flow is King". On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. One out of eight analysts have given Palantir a Buy rating, three have Hold ratings, and the remaining four have suggested a Sell. 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. Does it make it a bad investment? If Palantir was growing its government side of the business at the exclusion of its commercial side, it would be concerning. Second, mobility is growing in the automotive sector. Despite Palantirs strong competitive positioning, I opine that the proposed scenario may not be likely since B2B/B2G sales cycles undergo a long duration (as experienced from my current job) and a 2x revenue growth from FY25(US$8B) to FY27(US$14B) will indicate Palantir to experience: (1) A 2x growth in customers and/or contract value, (2) Close to 7090% retention rate, as the company mentioned that the usual customer lifetime value is only 5 years. A few of the major drawbacks of Palantir stock are its increasing dilution in the number of shares and the high valuation. Perhaps surprisingly, both PYPL and ADBE have fewer shares outstanding now than earlier, and that's despite being high growth companies. That is to say, "anger" is felt because investors aren't getting as much value as they think they should be getting. 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. This is all very rough, of course. I think it's useful to inspect the narratives. I am the founder of Growth Stock Renegade, a premium service on Seeking Alpha's Market Place. Article printed from InvestorPlace Media, https://investorplace.com/2021/11/palantir-might-be-worth-the-buy-for-patient-investors/. Google. WACC (Fig 4) is estimated at 8.5% for Palantir. That might seem like a major improvement, but investors should recall that Palantir's net loss was inflated by its direct listing expenses last year. Please disable your ad-blocker and refresh. Palantir can implement solutions quickly. That growth, combined with strong margins and cash flow, ought to translate to share price gains despite the friction and grind. I am bullish on PLTR stock. In the last quarter, Palantir reported a 37% year-over-year (YOY) increase in commercial revenue. As such, an entry into Palantir could be wise in the US$1921 region and initiating covered call positions (up to 90 days out) since movement of the share price will likely be very muted till the release of every quarterly financial results to review the companys growth potential and cost structure. That's the point. So been balls deep in Palantir since it went public in September. Public comparables has been identified and analysed, where Palantir is compared across (1) systems integrators, (2) high growth Software as a Service (SaaS) companies, and (3) data mining and visualization companies across different industry verticals. Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. Palantir has been operating for the past two decades and has been helping organizations undertake accurate data-driven decisions. We have war fighters who follow our nutrition. Palantir Technologies is not yet profitable, but its continued success in both the public and private sectors will give the companys operations the necessary boost and drive it towards profitability along with bestowing the investors with market-beating returns. Making the world smarter, happier, and richer. Palantir SBC is costly and is here to stay, therefore must be incorporated into a financial valuation. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. Eng, Go to company page And as Hake notes, even if investors have to wait two years for the stock to hit that target, they would still get an average annual return of 29.54%. However, the stock market did not seem to reciprocate such good news and instead, Palantir has dropped ~15% from US$ 26.75 to US$22.83 as of 15th Nov 2021. I'll come back to that $4 billion in revenue in a minute. As costs fall and revenues rise, its quality score will improve. Price as of January 18, 2023, 1:25 p.m. Copyright exercisable in time.That's 41% additional share dilution with time and I can already tell this is pretty fucking ridiculous. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. Uber, Lucky you got in in September. Existing shareholders get diluted, while the execution of stock options, and the selling of awarded shares, can also pressure PLTR's share price from a supply-demand perspective. Down 67% in 2022, Is Palantir Stock a Buy for 2023? ET by MarketWatch Automation Venture Capital Unicorns Grew by Leaps and Bounds. He shares his stock picks so readers get original insight that helps improve investment returns. Palantir revenue has been increasing over the years. Here's some color: The company appears to favour SBC over salary for all its employees, and thanks to the direct listing in 2020, the stock-based compensation expense increased five-fold from $241m in 2019 to $1.2bn in 2020. Please note all regulatory considerations regarding the presentation of fees must be taken into account. No cash balance or cash flow is included in the calculation. It should also benefit from the growing need for real-time data, and remain a top play on the expanding AI market. Is this happening to you frequently? Disclosure: 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. It also announced it would accept payment in. 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. 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. Its stock remains expensive relative to its sales, In an effort to guard against black swan events, Palantir recently made a large purchase of gold bars. Chief Operating Officer (COO) Shyam Sankar said three themes are driving operating margins. These options were set to expire on Dec. 3, 2021. Instead, it's a drag. 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. Both PYPL and ADBE were "cannibals" and appreciated over 600%. Here I do see a stronger relationship between share count and price. WebPalantir Technologies Inc. (PLTR) closed at $7.01 in the latest trading session, marking a +0.43% move from the prior day. Palantirs share price has undergone loads of controversy in terms of the forecasted direction and the possibility of a huge potential upside. In turn, banks will respond by strengthening their compliance programs. I have no business relationship with any company whose stock is mentioned in this article. 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. 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. contributing author for InvestorPlace.com and numerous other financial sites. Most investors dont have major gainers like TSLA or NVDA on their radar from the start. 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. 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. Financials. So I If history repeats itself, then PLTR stock could set up as a profitable trade. 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. In fact, based on the companys FCF projections, InvestorPlace contributor Mark Hake has a price target of $38.81 for Palantir. On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. Today, Palantir trades at $22, for a $42 billion market capitalization. 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. 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. PLTR stock lost 12% on the week, breaking down below the critical 20-, 50-, and 200-day moving average at around $25. It's still a major thorn in my side. The market's interest in the data mining firm was muted at first, but its stock skyrocketed to $45 per share during the Reddit-fueled rally in late January. Right now is the perfect time to subscribe because it's affordable for any budget. Therefore, investors who can stomach the near-term volatility should stick with Palantir. Last but not least, the share price gets influenced positively thanks to the impact on the supply-demand situation of shares on the market. 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. Start your free two-week trial today! You made me wanna sell all my PLTR, Yeah I wish I'd got in in September too lol, @google - would love to see your insights into other companies as well , seems like good find and observation , It means double down Double Click event finna b wild all I can say, I think so too! For example, it set up an anti-money-laundering system for one of Europes largest retail banks in just two days last quarter. Theres likely a few reasons for Palantir to favour SBC over salary. (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. values the company at around $40 billion. Best-of-breed growth stock ideas targeting oversized returns. Palantir Investor Relations. Its CEO, for example, received a massive $1.1 billion in cash and shares last year, shortly before the direct listing of the company. Commercial revenue accounted for 44% of the total in Q3. Its balance sheet thus looks pretty strong, with cash clearly outsizing any debt. 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 EBITDA multiple method and US$20.18 via terminal growth method. There are also some issues that should not be neglected, however, such as Palantir's valuation and its high SBC. MULN Stock Alert: Why Are Investors Suing Mullen Automotive? Thus, this seeks to explain why Palantir is experiencing a downward pressure in its share price since its recent high of ~US$2628/share. Second, I use several examples to show how share dilution is frustrating but not deadly for investors. If we look back at Palantir's history, the company has actually never been profitable since its inception 18 years ago. (New pick just posted.). Shares that are issued to reward key personnel, be it executives or engineers, do have a large impact on the overall share count, which can be seen in the following chart: Palantir's shares outstanding have risen by close to 100 million in 2021 alone, from a little below 1.8 billion to a little less than 1.9 billion. First, the company is growing its commercial revenue. Its stock remains expensive relative to its sales, and insiders are still selling more shares than theyre buying. 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).

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