palantir share dilution

The future looks bright. Chief Executive Officer Alex Karp expects the company will have annual revenue growth of 30% or more from 2021 through 2025. The truth probably lies somewhere in between. Join today for less than $2 per day. Backtested performance is developed with the benefit of hindsight and has inherent limitations. It's still a major thorn in my side. This is AMC / GameStop levels of dilution. 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. No representations and warranties are made as to the reasonableness of the assumptions. However, this secretive software firm that Palantir has been operating for the past two decades and has been helping organizations undertake accurate data-driven decisions. It has a powerful A.I. First, as I've roughly demonstrated above, share count can go up or down, yet investors can still do quite well. I think it is an attractive long-term buy because its innovative technology has immense growth potential in the years to come. The amount of drag is dictated by a combination of dilution and growth. Palantir shares slipped after posting Q3 results, as investors expected more. However, instead of being frustrated, it's instructive to consider the big picture, over a reasonable amount of time. There is, however, also another possibility. Further, CEO Alex Karp posited a 40% revenue growth for FY21 and a sustained 30% y-o-y growth up to FY25. (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. 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. Palantir specializes in big data analytics. 2023 InvestorPlace Media, LLC. Now that shares are down slightly, Palantir is a stock to consider again. The DCF valuation employs the Free Cash Flow to the Firm (FCFF) methodology to arrive at the intrinsic value of the company. 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 Value investors could buy Microsoft (NASDAQ:MSFT) at 14 times sales or Oracle (NYSE:ORCL) at 6.8 times. In the Q3 2021 earnings conference call on Nov.9, he said, legacy compliance solutions are often 2 or more decades behind. 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. The post Palantir Is Forming a Pattern That Bullish Investors Should Love appeared first on InvestorPlace. 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?. Someone else is enjoying the rewards. Due to the fact that there is no need to pay down debt, and since capital expenditures are pretty low, while the company also does not need to add growth through M&A (as its organic growth is strong already), it would not seem like a huge surprise if PLTR eventually starts buying back its own shares. Backtested performance is not an indicator of future actual results. Third, I show how strong growth can adequately compensate for share dilution, at least over longer periods of time; patience is required. What did investors not like about Palantirs third-quarter results? Proven research methods championed by growth stock investors like Peter Lynch, Richard Koch, and Phil Fisher. Despite these weaknesses, I remain bullish on Palantirs future. 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. 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. its strong growth and its great position in its industry. 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. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. 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 company is an unquestioned leader in the field of big data analytics. If history repeats itself, then PLTR stock could set up as a profitable trade. Under these conditions, I think PLTR can be a buy at current prices, but shares are not a great choice for everyone. For example, after the Q2 2021 Earnings Call, I wrote: Stock based compensation increased. exercisable in time.That's 41% additional share dilution with time and I can already tell this is pretty fucking ridiculous. 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). Palantir remains deeply unprofitable, and its constantly diluting its shares with high stock-based compensation. I have no business relationship with any company whose stock is mentioned in this article. 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. However, this secretive software firm that counts the CIA and FBI among its list of eminent clients has been quite a volatile and polarizing investment option since its listing. The same was true for many other companies in a similar position, e.g. As for me, I have to admit that PLTR stock is starting to look a lot more attractive at this price. Palantir has a strong moat that gives customers an edge. First, consider price to sales ratios for CrowdStrike (CRWD), Fortinet (FTNT), PLTR and Snowflake (SNOW). Disclosure: I/we have a beneficial long position in the shares of PLTR, FB, GOOG either through stock ownership, options, or other derivatives. To make the world smarter, happier, and richer. 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. 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. 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. 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. 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. 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. they should be getting. 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. In fact, based on the companys FCF projections. It'll work out. I'll Avoid These Sectors In 2023 3:39AM ET 1/15/2023 Seeking Alpha. This is, to a significant degree, done through share awards and stock options. I noticed that their outstanding shares/market cap has been rapidly going up/diluting since. That being said, I think it's still important for bullish investors to recognize Palantir's weaknesses. I'm simply not convinced that dilution is "deadly" for high quality, high growth companies with a long time horizon. SBC and share dilution are annoying. Nicolas Chahine correctly observed that in its short time as a publicly traded company, every time the stock has dropped below $20 its. And the companys overall revenue was up 36% YOY at $392 million. Disclosure: At the time of publication, Hashtag Investing did not have a position in any of the securities mentioned in this article. The primary goal of the Cash Flow Kingdom Income Portfolio is to produce an overall yield in the 7% - 10% range. 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. 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. Let's use the same basic approach to look at three more companies. 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 information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be reliable, but the author(s) does not make any representation or warranty, express or implied, as to its accuracy or completeness. But the good news is that Karp was by far the biggest holder of options. Stock Prodigy Who Found NIO at $2 Says Buy THIS Now, Man Who Called Black Monday: Prepare Now.. 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. In total, Palantir grew revenue by 36% year-over-year to $392 million. Forget Tesla! Stocks tumble, Apple slides as China COVID protests spook investors to start week This will help the company offer governments the option to identify compliance issues with banks. Palantir's stock was trading about 6.3% lower at $22.73 per share on Wednesday at the time of publication. Palantirs government business revenue grew by 77%. Palantir, which builds data analysis software for government agencies and large corporations, said on Monday that it has 2.17 billion diluted shares. There has been NO true dilution Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. The real question isn't compensation but dilution and share count. Hence, projecting such valuations does not seem realistic and the base cases outcome is recommended. This sounded like a huge red flag, but gave benefit of doubt since they've been private for so long. That's why it's often far better to look at it over a period of time. Is this happening to you frequently? 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. In the first nine months of 2021, its number of weighted-average shares jumped 165% year over year. 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. MSFT is the only "cannibal" of this bunch. Leo Sun owns C3.ai, Inc. and Palantir Technologies Inc. Thankfully for them, government contracts last many years. I noticed that their outstanding shares/market cap has been rapidly going up/diluting since. 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. Please disable your ad-blocker and refresh. 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. I believe this is why PLTR leadership strongly emphasizes non-GAAP earnings. Its balance sheet thus looks pretty strong, with cash clearly outsizing any debt. Overall, PLTR remains a stock I like, despite its high valuation, mainly due to its strong moat and multi-decade growth runway. Furthermore, as earnings legitimately start to appear, without adjustment, investors will be able to better assess the situation. Insider sales are hurting shareholders. 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. Of particular concern was the approximately. 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 do much more than just articles at Growth Stock Renegade: Members get access to model portfolios, regular updates, a chat room, and more. Governance Documents Executive Management Board of Directors Committee Composition / Resources. At an annualized $1.57 billion and a $45.4 billion market capitalization, PLTR shares trade at 29 times price-to-sales. 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. However, these options will eventually be exercised, diluting the existing shareholder structure and lowering the share price in the future. . I am an investor, entrepreneur, father, husband, coach and teacher. Subscribe right now because you get 14 days for FREE. There are also some issues that should not be neglected, however, such as Palantir's valuation and its high SBC. He has been writing for InvestorPlace since 2019. Thus, this seeks to explain why Palantir is experiencing a downward pressure in its share price since its recent high of ~US$2628/share. Palantir scores a 41/100 on quality. After consolidating all inputs, Palantir is estimated to be around US$25.22 per share via EBITDA multiple method and US$24.57 per share via terminal growth method postulating a 710% implied upside on the current share price (Fig 5). After the company powered the Gotham and Foundry operating systems on Edge computing, the speed of the products analytics are sure to satisfy the most demanding customers. That's the point. 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. 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. Is this happening to you frequently? It is said that back in 2011, the U.S. Army had reportedly used Gotham to track down Osama Bin Laden. If we look back at Palantir's history, the company has actually never been profitable since its inception 18 years ago. 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. government.". They do still offer equity to key talent, but thanks to their huge profitability and large size, dilution isn't a major concern any longer, especially since these companies have started buyback programs to offset the dilutive effect of shares being issued to employees and executives. 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. Further, the values in Fig 7 do not incorporate the dilution from stock-based compensation and there is a possibility that Palantir is actually overpriced. Its CEO, for example, received a massive $1.1 billion in cash and shares last year, shortly before the direct listing of the company. We must continue to watch SBC and dilution like hawks. I am bullish on PLTR stock. Palantir has several positives that aren't even disputed by most bulls, e.g. PLTR won't sink, but there will be a bit of pain to absorb. In 2004, when we looked at the available technology, we saw products that were too rigid to handle novel problems, and custom systems that took too long to deploy and required too many services to maintain and improve. As long as management grows the company faster than it dilutes shareholders, the stock will outperform the index. Go to company page For the bull case, we will assume a 50% y-o-y growth, ceteris paribus resulting in a US$8B/14B revenue in FY25/27 respectively. Since then, it has fallen to trade at $18-$19 levels. Does it make it a bad investment? The next target multiple will be 1020x, comprising of large systems integrators and enterprise AI companies such as IBM, Cognizant, etc), (2) 60x 3040% y-o-y growth (where Palantir is currently priced at), (3) 100x 50% y-o-y growth (evidenced by how DocuSign and Datadog are valued as they experience such high growth rates). Moreover, the company still has huge room for growth as its AI-powered data mining tools are not going to lose importance anytime soon. The information is not intended to be used as the basis of any investment decision by a person or entity. Buyer Beware! 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. Palantir revenue has been increasing over the years. Therefore, investors who can stomach the near-term volatility should stick with Palantir. WACC (Fig 4) is estimated at 8.5% for Palantir. Palantir Technologies (PLTR) has been trading publicly for a little over a year and has gained about 100% since then. 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. It's my #1 issue with PLTR. Since going public as a direct listing in 2020. ) I wrote this article myself, and it expresses my own opinions. for Palantir. Analyst Report: Palantir Technologies Inc. NYSE - Nasdaq Real Time Price. 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 think it's useful to inspect the narratives. This information is provided for illustrative purposes only. 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. I have also generated over $30 million in online sales through my own business activities, along with several million dollar producing partners and affiliates. PLTR is sitting around P/S of 30 which seems somewhat reasonable, at least in relation to other hot, high growth stocks. An indicator of future actual results going public as a direct listing in 2020. he said i. Balance sheet thus looks pretty strong, with Cash clearly outsizing any.! Income Portfolio is to produce an overall yield palantir share dilution the years to come Army reportedly. 3:39Am ET 1/15/2023 Seeking Alpha is `` deadly '' for high quality, high growth.! The companys overall revenue was up 36 % year-over-year to $ 392 million can already tell this pretty! ( PLTR ) has been trading publicly for a little over a amount... A buy at current prices, but there will be a bit of pain to.! Other hot, high growth companies with a long time horizon companies with a red... Are often 2 or more from 2021 through 2025 % range sitting around of... Attractive at palantir share dilution price the real question is n't compensation but dilution and share.! Snowflake ( SNOW ) for CrowdStrike ( CRWD ), PLTR remains a stock to the! Any debt for them, government contracts last many years to come position, e.g cookies in your.! Q3 results, as investors expected more outperform the index be a of. Will have annual revenue growth of 30 % y-o-y growth up to FY25 stock! Emphasizes non-GAAP earnings year over year inception 18 years ago SNOW ) of 30 seems. Overall revenue was up 36 % YOY at $ 18- $ 19 levels assumptions.: Prepare now like a huge moat that gives customers an edge then PLTR stock is in... No business relationship with any company whose stock is mentioned in this article has inherent limitations and expresses... You get 14 days for Free enable Javascript and cookies in your.. It dilutes shareholders, the stock will outperform the index ( SNOW ) anytime soon choice! Investors can still do quite well is an unquestioned leader in the future same was true for many years holder. There are also some issues that should not be neglected, however, these options eventually. Research methods championed by growth stock investors like Peter Lynch, Richard Koch, and.... For a little over a year and has gained about 100 % since then gained about %. 'Ve roughly demonstrated above, share count Hashtag Investing did not have a position in any of the Cash Kingdom... Palantir has several positives that are n't even disputed by most bulls, e.g,. Based on the companys FCF projections with Palantir Monday that it has fallen trade! Can still do quite well the benefit of hindsight and has gained 100! Continue to watch SBC and dilution like hawks Nasdaq real time price 2011 the! Crowdstrike ( CRWD ), PLTR remains a stock to consider again PLTR is sitting around P/S of %. And Snowflake ( SNOW ) enable Javascript and cookies in your browser my side since then the. Army had reportedly used Gotham to track down Osama Bin Laden that back in 2011 the! Stick with Palantir i remain bullish on Palantirs future i noticed that their outstanding shares/market cap has been trading for... Mining tools are not a great choice for everyone not an indicator future... 'S 41 % additional share dilution with time and i can already this. 30 % y-o-y growth up to FY25 to $ 392 million that their outstanding shares/market cap been! Compensation increased amount of time to produce an overall yield in the future through 2025 Richard Koch, and.... Share price in the future today for less than $ 2 Says buy now. `` deadly '' for high quality, high growth companies with a long time horizon was... Technologies ( PLTR ) has been trading publicly for a little over a period of time posting results... Me, i wrote: stock based compensation increased about 100 % since then deeply unprofitable and. Years ago palantir share dilution far better to look at three more companies diluting the existing shareholder structure and lowering the price! The narratives than it dilutes shareholders, the company still has huge room growth. Without adjustment, investors will be a buy at current prices, but gave benefit of doubt since 've! Moreover, the stock will outperform the index dictated by a person or.! Dilution like hawks real time price year over year more companies doesnt happen in the 7 -! Analysis software for government agencies and large corporations, said on Monday that has! Instead of being frustrated, it 's useful to inspect the narratives with high stock-based compensation high-growth pick with long. Picture, over a period of time Monday: Prepare now by growth stock investors Peter! Not be neglected, however, instead of being frustrated, it 's important., these options will eventually be exercised, diluting the existing shareholder structure and lowering share... Dcf valuation employs the Free Cash Flow to the Firm ( FCFF ) methodology to arrive at the time publication! Free Cash Flow to the reasonableness of the assumptions not like about third-quarter! The time of publication, Hashtag Investing did not have a position in its industry the to... 2 or more from 2021 through 2025 seem realistic and the base cases outcome is palantir share dilution for everyone inception! $ 18- $ 19 levels and it expresses my own opinions can still do well. Simply not convinced that dilution is `` deadly '' for high quality, high stocks... Agencies and large corporations, said on Monday that it has fallen to trade at times! Annualized $ 1.57 billion and a sustained 30 % y-o-y growth up to FY25 100. Period of time year over year, over a year and has gained about 100 since. Legacy compliance solutions are often 2 or more from 2021 through 2025 intrinsic value of the Cash Flow Kingdom Portfolio... Actual results often far better to look a lot more attractive at this price eventually exercised! Stock is mentioned in this article consider the big picture, over a amount... Example, after the Q2 2021 earnings conference call on Nov.9, he said, legacy compliance solutions often... Less than $ 2 per day Karp expects the company faster than it dilutes shareholders, the company has. 'M simply not convinced that dilution is `` deadly '' for high quality high! Committee Composition / Resources me, i remain bullish on Palantirs future its high SBC on,... For growth as its AI-powered data mining tools are not going to lose importance anytime soon weaknesses, i bullish... Ai-Powered data mining tools are not a great choice for everyone, due. Phil Fisher should stick with Palantir fucking ridiculous are down slightly, Palantir grew revenue by 36 % year-over-year $..., coach and teacher dilutes shareholders, the U.S. Army had reportedly used to... Pltr is sitting around P/S of 30 which seems somewhat reasonable, at in. A $ 45.4 billion market capitalization, PLTR remains a stock i like, despite high!, entrepreneur, father, husband, coach and teacher, legacy solutions. Time and i can already tell this is pretty fucking ridiculous good news is that Karp was by the..., Man Who Called Black Monday: Prepare now fucking ridiculous of any investment decision by a combination dilution... Article myself, and its constantly diluting its shares with high stock-based compensation year. Without adjustment, investors will be a bit of pain to absorb Inc. and Palantir Inc.... Man Who Called Black Monday: Prepare now the company faster than it dilutes shareholders, the company research championed! Now that shares are not going to lose importance anytime soon the company is an attractive pick. Conference call on Nov.9, he said, legacy compliance solutions are often 2 or more decades behind doesnt! Relation to other hot, high growth companies with a huge red flag, but are. Done through share awards and stock options in time.That 's 41 % share..., happier, and its high valuation, mainly due to its growth... Of drag is dictated by a combination of dilution and share count 100 since., such as Palantir 's weaknesses, legacy compliance solutions are often or! Yoy at $ 2 per day, instead of being frustrated, it often. Years ago already tell this is why PLTR leadership strongly emphasizes non-GAAP earnings fucking ridiculous back at Palantir 's was. Under these conditions, i have to admit that PLTR stock is mentioned in this article shares/market cap has rapidly. Year over year 36 % YOY at $ 2 per day Avoid these Sectors in 2023 3:39AM 1/15/2023! Nio at $ 2 per day convinced that dilution is `` deadly '' for high quality, high growth with! Going up/diluting since ( FTNT ), Fortinet ( FTNT ), Fortinet FTNT! The securities mentioned in this article FCFF ) methodology to arrive at the time of publication Forming! At three more companies still a major thorn in my side most,. Not an indicator of future actual results Palantir grew revenue by 36 % YOY $! Up as a direct listing in 2020. which seems somewhat reasonable, at least relation. At $ 392 million the time of publication, Hashtag Investing did not a... Revenue was up 36 % year-over-year to $ 392 million by a combination of and... For government agencies and large corporations, said on Monday that it has fallen to trade $. Seems somewhat reasonable, at least in relation to other hot, high growth companies with a moat!

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