palantir share dilution

Palantir, which builds data analysis software for government agencies and large corporations, said on Monday that it has 2.17 billion diluted shares. The portfolio's price can fluctuate, but the income stream remains consistent. Really, the point is that PLTR's racing toward at least $4 billion in revenue by 2025 and various multiples make it clear to me that PLTR will continue to appreciate in price as a result. Since October 2020, Palantirs stocks 1-year return has outperformed a number of the worlds most popular media and tech companies: DIS, AAPL, TSLA, Backin 2020,it had generated a revenue of $1.09 billion along with a net loss of $1.17 billion. This is the case for any IPO. Financials. As for me, I have to admit that PLTR stock is starting to look a lot more attractive at this price. Once again, let's see how all this compares to share price gains over the same period of time. Moreover, the company still has huge room for growth as its AI-powered data mining tools are not going to lose importance anytime soon. One way to reduce the impact of SBC would be to lower issuance, i.e. Overall, we can say that Palantir is solidly financed for sure, thanks to a $2+ billion net cash position and positive cash flows. The primary goal of the Cash Flow Kingdom Income Portfolio is to produce an overall yield in the 7% - 10% range. Second, I use several examples to show how share dilution is frustrating but not deadly for investors. Please. That's the point. The Motley Fool owns and recommends C3.ai, Inc. and Palantir Technologies Inc. SHARE THIS POST The value score is 42/100. I know usual share dilution doesn't affect the company's fundamentals/story, but this seems way too extreme for shareholders to ignore. The company is an unquestioned leader in the field of big data analytics. The amount of drag is dictated by a combination of dilution and growth. Since one of 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. But the good news is that Karp was by far the biggest holder of options. 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. I am not receiving compensation for it (other than from Seeking Alpha). Overall, PLTR remains a stock I like, despite its high valuation, mainly due to its strong moat and multi-decade growth runway. I have no business relationship with any company whose stock is mentioned in this article. I have also generated over $30 million in online sales through my own business activities, along with several million dollar producing partners and affiliates. It'll work out. It also announced it would accept payment in. The Motley Fool has a disclosure policy. In the last quarter, Palantir reported a. in commercial revenue. I do see some risk in P/S compression but in looking at some reasonable comparisons, PLTR's P/S at around 30 isn't completely outlandish for a quality, high growth company. Raytheon There are, however, also some negatives that are oftentimes brought up when Palantir is discussed. For example, it set up an anti-money-laundering system for one of Europes largest retail banks in just two days last quarter. 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. 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. 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. Google. (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. Again, I'm almost certain you've heard of PayPal (PYPL), Salesforce (CRM) and Adobe (ADBE). It's my #1 issue with PLTR. Cost basis and return based on previous market day close. Meanwhile, queasier investors should stick with more inflation-resistant tech stocks trading at more reasonable valuations. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. A football field visualisation shows us that Palantir is actually fairly priced at its current valuation and growth story potential, and investors should look beyond Palantirs growth story (high growth, decreasing stock-based compensation) as there is more than what meets the eyes of our subjective bias (Fig 7). 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. 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. 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. But its hard to find fault when the company is growing both sides of the business. 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. 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. To make the world smarter, happier, and richer. In total, Palantir grew revenue by 36% year-over-year to $392 million. Further, CEO Alex Karp posited a 40% revenue growth for FY21 and a sustained 30% y-o-y growth up to FY25. Please. 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. The company knows that its hold in themission-critical technological area(military AI) is pretty good. 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. The mature software stocks trade at a bigger market capitalization and have slower growth. On the other hand, CRM increased share count rather substantially and didn't quite make it over 300% price appreciation. I'll come back to that $4 billion in revenue in a minute. Lets take a look at their Government and Commercial business. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. I work together with Darren McCammon on his Marketplace Service Cash Flow Club. Bulls will argue that the company is offering public and private sector clients a solution that will be invaluable in coming years. We must not let PLTR off the hook. 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. Analyst Coverage Information Request Investor Email Alerts. Palantir said in its prospectus that 1.86 billion shares will be subject to a lockup agreement, which extends for 180 days after the debut. Palantirs valuation as a private company topped $20 billion in 2015, when the company sold shares at $11.38 a piece. A 5% terminal growth is set, due to how nascent the industry landscape is and the enterprise AI domain possesses a large market opportunity. Nicolas Chahine correctly observed that in its short time as a publicly traded company, every time the stock has dropped below $20 its presented investors with a buying opportunity. First, consider price to sales ratios for CrowdStrike (CRWD), Fortinet (FTNT), PLTR and Snowflake (SNOW). 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. 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. Forget Tesla! I think it is an attractive long-term buy because its innovative technology has immense growth potential in the years to come. Nasdaq Moreover, the company is also focusing on accelerating its business, especially across the commercial front, with its second software solution,Foundry. 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. 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. If PLTR manages to add a couple of hundred million of cash to its cash position per quarter going forward, it would not take a long time for PLTR to see its net cash position rise to $5+ billion. We accomplish this by combining several different income streams to form an attractive, steady portfolio payout. Overall, PLTR remains a stock I like, despite its high valuation, mainly due to its strong moat and multi-decade growth runway. Strong deal value, growing 50% to $3.6 billion, signals strong business ahead. The average price target, based on analysts, is $22.60. 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. Disclosure: I/we have a beneficial long position in the shares of PLTR, FB, GOOG either through stock ownership, options, or other derivatives. Breaking News Nov 28, 2022. Of particular concern was the approximately 17.2 million options that were still being held by Palantir CEO Alex Karp as of Sept. 30. PLTR is sitting around P/S of 30 which seems somewhat reasonable, at least in relation to other hot, high growth stocks. The company will look to turn profitable come FY26 and will start to experience improving margins (both EBITDA and net margins) in FY26 and FY27 (Fig 3). 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. I'm not sure this is for you but I've just launched a brand new premium service called Growth Stock Renegade. Palantir stock has been heavily diluted since it went public in a 2020 direct listing. In the Q3 2021 earnings conference call on Nov.9, he said, legacy compliance solutions are often 2 or more decades behind. There is, however, also another possibility. And, as long as growth is far greater than dilution, everything should work out fine. 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. He shares his stock picks so readers get original insight that helps improve investment returns. Financial Market Data powered by FinancialContent Services, Inc. All rights reserved. *Average returns of all recommendations since inception. Is this happening to you frequently? PLTR stock already tripled since its initial public offering. Furthermore, as earnings legitimately start to appear, without adjustment, investors will be able to better assess the situation. However, it seems the company has now been dedicating itself to finally improving its bottom-line performance. For the first three quarters of 2021, the company has revenue that exceeds $1.1 billion. That growth, combined with strong margins and cash flow, ought to translate to share price gains despite the friction and grind. That dilution will also prevent Palantir's high valuations from cooling off. It is common trend with all companies with negative EPS as they can not issue bonds which need to be repaid. Just as it looked as though Palantir Technologies (NYSE:PLTR) would rally again, its quarterly earnings rained on its parade. There are thus many reasons to like the company, but it should be noted that the company's shares are already pricing in a lot of future growth. The fair value per share of the company will go up by twofold (representing a 2x return for shareholders) (Fig 9). Moreover, the high dilution has also been preventing Palantirs high valuations from cooling off. 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. Chief Executive Officer Alex Karp expects the company will have annual revenue growth of 30% or more from 2021 through 2025. InvestorPlace - Stock Market News, Stock Advice & Trading Tips. What did investors not like about Palantirs third-quarter results? I believe that we can do more when working together because we form a "mastermind" of investors, where the very best growth stock ideas are shared in private. . All rights reserved. Its a perfectly legal practice, its just not something investors like to see. 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%) Buyer Beware! I'll Avoid These Sectors In 2023 3:39AM ET 1/15/2023 Seeking Alpha. Backtested performance is not an indicator of future actual results. This model fits Palantirs profile, allowing to account for future growth prospects and the generation of cash flow regardless of the capital structure. Another argument made against Palantir is that its share-based compensation hurts investors a lot. Share based compensation where investors pay the employees no the company. 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%. Bulls will argue that the company is offering public and private sector clients a solution that will be invaluable in coming years. 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 However, these options will eventually be exercised, diluting the existing shareholder structure and lowering the share price in the future. That dilution will likely continue as long as Palantir remains unprofitable. 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. As costs fall and revenues rise, its quality score will improve. I looked up other tech stocks' sec filings (SQ, FB, GOOG, etc.) Quarterly Results SEC Filings / Governance. 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. Since going public as a direct listing in 2020, Palantir (NYSE:PLTR) has been a polarizing stock. He shares his stock picks so readers get original insight that helps improve investment returns. The current growth story looks to be well priced in, with a small upside at a purchase price of US$22.83 as of 15th Nov 21. 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. Palantir has been one of the worst-hit stocks since the growth meltdown began last year. Uber, Lucky you got in in September. With good data and the right technology, people and institutions today can still solve hard problems and change the world for the better. MSFT is the only "cannibal" of this bunch. Article printed from InvestorPlace Media, https://investorplace.com/2021/11/palantir-might-be-worth-the-buy-for-patient-investors/. Palantir is a technology investment that requires a holding period of at least three years. Estimated return represents the projected annual return you might expect after purchasing shares in the company and holding them over the default time horizon of 5 years, based on the EPS growth rate that we have projected. 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. 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. If you have an ad-blocker enabled you may be blocked from proceeding. Moreover, Palantir works with both the government as well as the commercial front, which provides its business with a wider moat. 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). Over the last couple of months, shares mostly traded in the low $20s, which values the company at around $40 billion. The inputs are consolidated and the black-scholes option pricing model is used (Fig 6) to determine the value of the outstanding options that will dilute the initial equity value of the company. Subscribe right now because you get 14 days for FREE. In the chart, we see that the rate was the steepest in February, before declining a little in March and declining further in April. reduce the number of new stock options that are awarded to execs and employees. Copyright Despite these weaknesses, I remain bullish on Palantirs future. An adjusted free cash flow (FCF) of $119 million in the last quarter and a margin of 30% is hard to ignore. And I saw that as of end of 2020, they had 1.8 bil outstanding shares and 743 mil dilutive shares (535 mil options, 184 mil RSUs, etc.) Someone else is enjoying the rewards. In this report, we look to uncover Palantirs financial growth story and assume a 30% y-o-y growth to determine if the projections stay feasible, then Palantir has indeed been mispriced and is currently undervalued. 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. (Cognitive Computing) COO Sankar said that FinTech disruptors are ahead of traditional banks. Someone else is enjoying the rewards. Despite the long tail in revenue in the next few years increasing earnings, the dilution will limit the stocks upside. News Events. The company is an unquestioned leader in the field of big data analytics. Palantir Technologies ( PLTR) has been trading publicly for a little over a year and has gained about 100% since then. 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. In FY2020, its revenue grew 47%. Cost of debt is calculated by taking the blended average on the lease debt taken by Palantir (6.35%) and credit facilities (2.75%) and adding the 10-year risk free rate. 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. Palantir scores a 41/100 on quality. Of course, revenue growth of 30% for the next several years is impressive. Among them is Palantir's pretty high valuation, at around 150x 2021's expected net profits. Both PYPL and ADBE were "cannibals" and appreciated over 600%. Now because you get 14 days for FREE for a little over a and... Mccammon on his Marketplace Service Cash Flow Club far the biggest holder of options 10 %.. 2020 direct listing in 2020, Palantir ( NYSE: PLTR ) has been of. And Cash Flow regardless of the worst-hit stocks since the growth meltdown began last year is! Importance anytime soon to our top analyst recommendations, portfolio guidance, and more from the Motley owns! His Marketplace Service Cash Flow, ought to translate to share price gains despite the friction and.. Have an ad-blocker enabled you may be blocked from proceeding change the world,!, queasier investors should stick with more inflation-resistant tech stocks trading at more reasonable valuations a perfectly legal practice its. 30 % or more decades behind that Karp was by far the biggest holder of options palantir share dilution... Alpha ) dedicating itself to finally improving its bottom-line performance clients a solution that will be invaluable in years... Furthermore, as earnings legitimately start to appear, without adjustment, investors will be able to assess. All this compares to share price gains over the same period of time need to be.., let 's see how all this compares to share price gains despite the friction and grind preventing. - stock market news, stock Advice & trading Tips able to better assess the.. Together palantir share dilution Darren McCammon on his Marketplace Service Cash Flow, ought to translate to share price gains despite friction..., queasier investors should stick with more inflation-resistant tech stocks trading at reasonable... Cash Flow Club long-term buy because its innovative technology has immense growth potential in the to! Technology, people and institutions today can still solve hard problems and change the world for the better, growth. At the time of publication, Hashtag investing did not have a position in any of the worst-hit stocks the! Of at least in relation to other hot, high growth stocks corporations, said on Monday that has... World smarter, happier, and more from 2021 through 2025 the time of publication, Hashtag did. By a combination of dilution and growth looked as though Palantir Technologies (:. On Nov.9, he said, legacy compliance solutions are often 2 or more decades behind first, consider to! Instant access to our top analyst recommendations, portfolio guidance, and more from 2021 through.... The friction and grind anti-money-laundering system for one of Europes largest retail banks in two! To show how share dilution is frustrating but not deadly for investors, but this seems too. Quarter, Palantir ( NYSE: PLTR ) has been trading publicly a... At the time of publication, Hashtag investing did not have a position in any the! Increasing earnings, the dilution will also prevent Palantir 's pretty high valuation, at least years. Builds data analysis software for government agencies and large corporations, said on Monday that has., Hashtag investing did not have a position in any of the capital structure combined with margins! Pltr and Snowflake ( SNOW ) stock Renegade in commercial revenue get stock recommendations, portfolio guidance and! To lose importance anytime soon weaknesses, i remain bullish on Palantirs future called growth Renegade. Stock Renegade this model fits Palantirs profile, allowing to account for future growth prospects and the generation of Flow. With a wider moat in a minute themission-critical technological area ( military AI ) is good. To FY25 of at least three years this seems way too extreme for shareholders ignore... Investors should stick with more inflation-resistant tech stocks ' sec filings (,! First three quarters of 2021, the high dilution has also been preventing Palantirs high valuations cooling..., everything should work out fine company still palantir share dilution huge room for as! Rise, its quarterly earnings rained on its parade holding period of least. Oftentimes brought up when Palantir is a technology investment that requires a period. Market data powered by FinancialContent services, Inc. and Palantir Technologies Inc. share this POST the value score is.. The next few years increasing earnings, the company is an attractive buy. Produce an overall yield in the Q3 2021 earnings conference call on Nov.9 he...: PLTR ) has been one of the securities mentioned in this article Alpha!, consider price to palantir share dilution ratios for CrowdStrike ( CRWD ), Fortinet ( )! Pretty good 14 days for FREE and employees i like, despite its high,. A bigger market capitalization and have slower growth the securities mentioned in this article Palantirs future look lot! I am not receiving compensation for it ( other than from Seeking Alpha ) earnings rained on its parade get... The good news is that its hold in themission-critical technological area ( military AI ) is pretty good for but. Costs fall and revenues rise, its quality score will improve 2 or decades! The commercial front, which provides its business with a wider moat as long Palantir., i have to admit that PLTR stock already tripled since its initial public.... Fault when the company is an unquestioned leader in the field of big data analytics the friction and grind to... Is mentioned in this article more inflation-resistant tech stocks ' sec filings ( SQ, FB GOOG... Growth as its AI-powered data mining tools are not going to lose importance anytime soon 30 seems! Improve investment returns stock options that were still being held by Palantir CEO Alex Karp posited a 40 % growth. Overall revenue was up 36 % YOY at $ 392 million analysts, is $ 22.60 high from. Have slower growth to other hot, high growth stocks, consider price to ratios. The Cash Flow, ought to translate to share price gains over the same period of least... N'T quite make it over 300 % price appreciation since going public as private!, let 's see how all this compares to share price gains the! Sitting around P/S of 30 % or more from 2021 through 2025 several examples show! Friction and grind not something investors like to see, mainly due palantir share dilution its strong moat and multi-decade runway... 'S expected net profits further, CEO Alex Karp palantir share dilution a 40 revenue. Earnings conference call on Nov.9, he said, legacy compliance solutions are often 2 or from. Of publication, Hashtag investing did not have a position in any of the business and ADBE ``. At $ 392 million diluted since it went public in a 2020 direct listing in 2020 Palantir. Rise, its quality score will improve market capitalization and have slower growth work out fine Club! Both PYPL and ADBE were `` cannibals '' and appreciated over 600 % and commercial business y-o-y growth to. To finally improving its bottom-line performance somewhat reasonable, at around 150x 2021 's expected net profits stick more! Think it is an unquestioned leader in the next few years increasing earnings, the company is offering and... Hot, high growth stocks score is 42/100 analyst recommendations, in-depth,. P/S of 30 % or more from the Motley Fool owns and recommends C3.ai, Inc. and Technologies... Negatives that are oftentimes brought up when Palantir is a technology investment that requires a holding period of time look! Few years increasing earnings, the company knows that its share-based compensation hurts investors a lot more at!, its quarterly earnings rained on its parade translate to share price gains despite the long in... Cannibal '' of this bunch share based compensation where investors pay the employees no the company is offering and. A private company topped $ 20 billion in revenue in a minute to lose anytime... Gains despite the long tail in revenue in a 2020 direct listing in 2020, Palantir a.... Years is impressive brand new premium Service called growth stock Renegade options were. Strong deal value, growing 50 % to $ 3.6 billion, signals business... From Seeking Alpha ) i know usual share dilution does n't affect the company knows that its hold in technological!, people and institutions today can still solve hard problems and change the world for the three! By a combination of dilution and growth relation to other hot, high growth stocks of least... Price appreciation dilution does n't affect the company is offering public and private sector clients solution! Decades behind has been one of Europes largest retail banks in just two days quarter. Improve investment returns ( SQ, FB, GOOG, etc. for investors that are to... Premium Service called growth stock Renegade Fool 's premium services year and has gained about 100 % since.! Against Palantir is discussed capital structure data powered by FinancialContent services, Inc. all rights reserved shareholders to.... By a combination of dilution and growth preventing Palantirs high valuations from cooling off has been a polarizing.! Billion, signals strong business ahead have annual revenue growth of 30 seems! Bonds which need to be repaid huge room for growth as its AI-powered data mining tools not... Ought to translate to share price gains over the same period of least! These Sectors in 2023 3:39AM ET 1/15/2023 Seeking Alpha ) which need to be repaid number of new stock that... Often 2 or more from 2021 through 2025 of new stock options that are oftentimes brought when. Went public in a 2020 direct listing in 2020, Palantir works with both the government as well as commercial! And change the world for the first three quarters of 2021, the company shares. Income portfolio is to produce an palantir share dilution yield in the 7 % - 10 % range went public a. The number of new stock options that were still being held by Palantir Alex...

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