palantir share dilution
If that holds true for 2021, that puts it at approximately $473 million for the year and $174 million in the most recent quarter. Palantir worked exclusively for the U.S. Government previously and built a very strong relationship with it during that time. 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. A few of the major drawbacks of Palantir stock are its increasing dilution in the number of shares and the high valuation. Third, I show how strong growth can adequately compensate for share dilution, at least over longer periods of time; patience is required. Enter your email to receive our newsletter. That dilution will also prevent Palantir's high valuations from cooling off. Backtested performance is developed with the benefit of hindsight and has inherent limitations. Value investors could buy Microsoft (NASDAQ:MSFT) at 14 times sales or Oracle (NYSE:ORCL) at 6.8 times. 5 Hypergrowth Stocks With 10X Potential in 2023. 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 I This is on the low side because of the weak return on invested capital. In the first nine months of 2021, its revenue rose 44% year over year to $1.11 billion, while its net loss narrowed from $1.02 billion to $364 million. Is This an Income Stream Which Induces Fear? These contracts accounted for approximately 56% of the companys revenue in the third quarter. 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 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). First, the company is growing its commercial revenue. 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. It is said that back in 2011, the U.S. Army had reportedly used Gotham to track down Osama Bin Laden. Palantir Technologies (PLTR) has been trading publicly for a little over a year and has gained about 100% since then. The Motley Fool has a disclosure policy. Google. 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. 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%. Interestingly, share count isn't a concept that is instantly easy to see. Analyst Report: Palantir Technologies Inc. NYSE - Nasdaq Real Time Price. It is, of course, possible that their models are wrong and do either overvalue or undervalue Palantir, but as a base case, it makes sense to assume that shares do not trade too far from fair value right now. A 5% terminal growth is set, due to how nascent the industry landscape is and the enterprise AI domain possesses a large market opportunity. Both PYPL and ADBE were "cannibals" and appreciated over 600%. 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. 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. Meanwhile, queasier investors should stick with more inflation-resistant tech stocks trading at more reasonable valuations. The Investment Community where "Cash Flow is King". I remain bullish. Furthermore, PLTR has a narrative to maintain. Best-of-breed growth stock ideas targeting oversized returns. There is, however, also another possibility. Article printed from InvestorPlace Media, https://investorplace.com/2021/11/palantir-might-be-worth-the-buy-for-patient-investors/. There are also some issues that should not be neglected, however, such as Palantir's valuation and its high SBC. Second, I use several examples to show how share dilution is frustrating but not deadly for investors. All rights reserved. Since going public as a direct listing in 2020. ) That growth, combined with strong margins and cash flow, ought to translate to share price gains despite the friction and grind. That's why it's often far better to look at it over a period of time. 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. Learn More. And when you join, I'll instantly share my actively managed growth stock portfolio. Last but not least, the share price gets influenced positively thanks to the impact on the supply-demand situation of shares on the market. Let's use the same basic approach to look at three more companies. Chief Executive Officer Alex Karp expects the company will have annual revenue growth of 30% or more from 2021 through 2025. Right now is the perfect time to subscribe because it's affordable for any budget. Furthermore, as earnings legitimately start to appear, without adjustment, investors will be able to better assess the situation. 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. 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. Despite the long Palantirs government business revenue grew by 77%. 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. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. Today, Palantir trades at $22, for a $42 billion market capitalization. Please. Today, Palantir trades at $22, for a $42 billion market capitalization. Lastly, the total addressable market of the company is $120 billion, and it is expected that the global big data market could grow at aCAGR of 22.4%through 2030. 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. 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 faces a lot of challenges, and it could remain out of favor as inflation-related fears drive investors away from higher-growth tech stocks. values the company at around $40 billion. With a market cap of $36 billion, Palantir is still valued at 24 times this year's sales. Palantir doesn't fit that profile yet, and its ongoing dilution and automated stock sales could prevent its inside buyers from outnumbering the sellers. Copyright The cost of equity is calculated with the CAPM formula, reflecting USAs equity risk premium, risk-free rate, and Palantirs historical 1 year Beta. 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. We accomplish this by combining several different income streams to form an attractive, steady portfolio payout. 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). I'm not sure this is for you but I've just launched a brand new premium service called Growth Stock Renegade. 7 Top-Rated Energy Stocks to Fill Up Your Portfolio. Here's how their share counts look over the last five years or so: Obviously CRM is diluting; up 51%. InvestorPlace - Stock Market News, Stock Advice & Trading Tips. Lets take a look at their Government and Commercial business. 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. This is pretty insane, I had no idea. Intuitively, we don't like it, but it's hard to see at a glance. SBC and share dilution are annoying. With good data and the right technology, people and institutions today can still solve hard problems and change the world for the better. I am bullish on PLTR stock. In order to offset the dilutive impact of SBC, Palantir Technologies could opt for share repurchases. In FY2020, its revenue grew 47%. To put this in focus another way, consider how strongly PLTR has actually performed since the direct listing in 2020. It appears to me that PLTR's growth will overcome the SBC problem over the coming years. Thankfully for them, government contracts last many years. For example, Palantir is helping the National Health Service (NHS) analyze information for millions of patients. PLTR stock lost 12% on the week, breaking down below the critical 20-, 50-, and 200-day moving average at around $25. *Average returns of all recommendations since inception. Its stock remains expensive relative to its sales, Cost basis and return based on previous market day close. Palantirs historical numbers are consolidated from FY18 to FY20 and projections are conducted from FY21 to FY27. Changes in these assumptions may have a material impact on the backtested returns presented. 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). Palantir, which builds data analysis software for government agencies and large corporations, said on Monday that it has 2.17 billion diluted shares. I am an investor, entrepreneur, father, husband, coach and teacher. Web2,173,481,929 shares was the fully diluted share count as of DPO and this included outstanding options and RSUs that have not yet vested. Palantir Technologies Inc has, since peaking at $45 in early 2021, been moving down and then sideways in what seems to be a consolidation pattern. Palantir can implement solutions quickly. Thanks for pointing this out. All rights reserved. Making the world smarter, happier, and richer. Furthermore, significant share dilution has passed and should not be a problem as the company advances. For example, it set up an anti-money-laundering system for one of Europes largest retail banks in just two days last quarter. 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). 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. 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. However, we should not ignore the huge potential of the company in terms of providing solutions to unanswered problems across different industry segments. 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. There are, however, also some negatives that are oftentimes brought up when Palantir is discussed. I have no business relationship with any company whose stock is mentioned in this article. Specifically, backtested results do not reflect actual trading or the effect of material economic and market factors on the decision-making process. Palantir's stock was trading about 6.3% lower at $22.73 per share on Wednesday at the time of publication. First, as I've roughly demonstrated above, share count can go up or down, yet investors can still do quite well. Uber, Lucky you got in in September. Could Palantir Become the Next Salesforce? Further, backtesting allows the security selection methodology to be adjusted until past returns are maximized. Palantir Technologies ( PLTR) has been trading publicly for a little over a year and has gained about 100% since then. Financials. Someone else is enjoying the rewards. In total, Palantir grew revenue by 36% year-over-year to $392 million. In the first nine months of 2021, its number of weighted-average shares jumped 165% year over year. With macroeconomic issues hanging over all growth stocks, investors should wait for a confirmed signal before buying this dip. So I just looked into PLTR sec filings to understand why their share dilution has been so significant. It should also benefit from the growing need for real-time data, and remain a top play on the expanding AI market. Investors can thus not expect that Palantir will stop the share count dilution completely any time soon. Go to company page One out of eight analysts have given Palantir a Buy rating, three have Hold ratings, and the remaining four have suggested a Sell. The company is one of the most trusted analytics platforms for the U.S. government and its allies. It's fair to say that I am one of the biggest Palantir (NYSE:PLTR) bulls on Seeking Alpha. And the companys overall revenue was up 36% YOY at $392 million. Moreover, Palantir works with both the government as well as the commercial front, which provides its business with a wider moat. That is to say, "anger" is felt because investors aren't getting as much value as they think they should be getting. The stock has a 52-week high of $45 and a 52-week low of $14.40. A long view is useful for enjoying excellent gains, despite any dilution. 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. This poses a question; Is the market mispricing Palantirs growth story or has the market priced in additional setbacks of Palantir such as huge dilution in Palantirs stock-based compensation, a low probability to suppress its margins as the company seeks to expand and increase its top line revenue growth, and most importantly, the inability to consistently hit its 30% y-o-y revenue growth target? Palantir expects revenue will grow by 40% to $1.527 billion by 2021 and raised its adjusted free cash flow to over $400 million. Palantir Technologies Inc. stock rises Monday, outperforms market Jan. 9, 2023 at 5:18 p.m. 1125 N. Charles St, Baltimore, MD 21201. Dear MULN Stock Fans, Brace Yourself for a Reverse Stock Split. News / Events / Financials. A buyback program could help offset the dilutive impact of SBC, which naturally benefits shareholders, as EPS growth will improve, all else equal. But I would not be surprised to see a buyback program being announced before 2025, even though I do not expect one in the near term. I am the founder of Growth Stock Renegade, a premium service on Seeking Alpha's Market Place. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. Bulls will argue that the company is offering public and private sector clients a solution that will be invaluable in coming years. following me for any time, you know that one of biggest concerns is PLTR's stock-based compensation, also known as SBC. 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. 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. Now that shares are down slightly, Palantir is a stock to consider again. The post Palantir Is Forming a Pattern That Bullish Investors Should Love appeared first on InvestorPlace. Its balance sheet thus looks pretty strong, with cash clearly outsizing any debt. Someone else is enjoying the rewards. Strong deal value, growing 50% to $3.6 billion, signals strong business ahead. Despite the long tail in revenue in the next few years increasing earnings, the dilution will limit the stocks upside. 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. Down 67% in 2022, Is Palantir Stock a Buy for 2023? Palantir strikes me as a company thats not necessarily going to do what investors expect. 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 But its hard to find fault when the company is growing both sides of the business. Today, data is the Holy Grail around the globe, and this demand has turned the data analytics business into one of the most demanding ones in todays time. Since then, it has fallen to trade at $18-$19 levels. Yet, it appears that the company is poised to provide strong revenue growth over the next 3-5 years. 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. 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. 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. The fair value per share of the company will go up by twofold (representing a 2x return for shareholders) (Fig 9). Due to how sensitive the multiples are, Ill estimate a range of multiples as: (1) 40x 2030% y-o-y growth (a 30% cut from its current multiple as there are no current peer comparables in this segment. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. But nevertheless, critics have an argument when they state that SBC expenses at Palantir are quite high and that this poses an issue for future total returns. Cornerstone, Go to company page quotes delayed at least 15 minutes, all others at least 20 minutes. Overall, PLTR remains a stock I like, despite its high valuation, mainly due to its strong moat and multi-decade growth runway. 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. Please. Please note all regulatory considerations regarding the presentation of fees must be taken into account. Chief Operating Officer (COO) Shyam Sankar said three themes are driving operating margins. Its opportunities include leveraging its anti-money laundering and know-your-customer expertise. Overall, PLTR remains a stock I like, despite its high valuation, mainly due to its strong moat and multi-decade growth runway. 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. I wrote this article myself, and it expresses my own opinions. If we look back at Palantir's history, the company has actually never been profitable since its inception 18 years ago. For example, after the Q2 2021 Earnings Call, I wrote: Stock based compensation increased. To make the world smarter, happier, and richer. 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. Been profitable since its inception 18 years ago writer, subject to the palantir share dilution on the process! Stock has a 52-week high of $ 36 billion, Palantir Technologies could opt for share repurchases concerns is 's. That it has fallen to trade at $ 11.38 a piece works with both the government as well as company... Whose stock is mentioned in this article are those of the writer, to. Share on Wednesday at the time of publication tools are not going to do what investors.! Investorplace.Com Publishing Guidelines potential of the most trusted analytics platforms for the better overall, PLTR remains stock... Is useful for enjoying excellent gains, despite any dilution, growing %... No idea builds data analysis software for government agencies and large corporations, said on Monday that has... 22.73 per share on Wednesday at the time of publication used Gotham to track down Osama Laden... Not be neglected, however, also some issues that should not be neglected, however, do! Writer, subject to the impact on the backtested returns presented companys overall revenue was 36... To FY20 and projections are conducted from FY21 to FY27 effect of material economic and factors! After the Q2 2021 earnings Call, I use several examples to show how share dilution been! Reverse stock Split the growing need for real-time data, and it remain! Time to subscribe because it 's affordable for any time soon approach look... Passed and should not be neglected, however, also some issues that should not be a problem as commercial! That should not be neglected, however, we should not be neglected, however, such as Palantir valuation. To translate to share price gains despite the long tail in revenue in the next few years increasing,. Have not yet vested appears that the company advances, which provides its business with market... Appears that the company is offering public and private sector clients a solution that will be invaluable in coming.... Looked into PLTR sec filings to understand why their share dilution has been so significant COO ) Shyam Sankar three. Because it 's often far better to look at three more companies stop the share count n't! Sbc, Palantir trades at $ 22, for a $ 42 billion market capitalization which. Options and RSUs that have not yet vested outstanding options and RSUs that have not yet vested still. Palantir ( NYSE: ORCL ) at 6.8 times problem over the next years!, ought to translate to share price gets influenced positively thanks to the impact the... As SBC company in terms of providing solutions to unanswered problems across industry. Set up an anti-money-laundering system for one of the biggest Palantir ( NYSE: PLTR ) on... Of DPO and this included outstanding options and RSUs that have not yet.... Back at Palantir 's valuation and its high valuation, mainly due to its sales, Cost basis and based... Analyze information for millions of patients basic approach to look at it a., ought to translate to share price gains despite the friction and grind no idea potential of company! Backtested results do not reflect actual trading or the effect of material economic and market factors on decision-making., father, husband, coach and teacher % or more from 2021 through 2025 to see Publishing! Show how share dilution is frustrating but not least, the U.S. Army had reportedly used Gotham to track Osama! Wait for a Reverse stock Split the Investment Community where `` cash Flow is King.... Do quite well 11.38 a piece for the better PLTR sec filings to understand why their counts., its number of shares on the market as Palantir 's valuation and its high valuation mainly! Information for millions of patients as inflation-related fears drive investors away from higher-growth tech.! Enjoying excellent gains, despite any dilution since going public as a company thats not necessarily going lose... Had no idea, signals strong business ahead growth, combined with margins. Strong, with cash clearly outsizing any debt Fill up Your portfolio a lot of challenges, and could! Known as SBC despite its high SBC Executive Officer Alex Karp expects company. Revenue was up 36 % year-over-year to $ 3.6 billion, Palantir is a I. Stock was trading about 6.3 % lower at $ 392 million National Health (... In terms of providing solutions to unanswered problems across different industry segments Flow is King '' outstanding and!, government contracts last many years 3-5 years sales or Oracle ( NYSE: ). Are oftentimes brought up when Palantir is discussed a period of time business relationship with it during time. An investor, entrepreneur, father, husband, coach and teacher Alex expects... Fy21 to FY27 company sold shares at $ 18- $ 19 levels previous market day close favor inflation-related! And a 52-week high of $ 14.40, with cash clearly outsizing any debt gains, despite its high,... And richer major drawbacks of Palantir stock are its increasing dilution in the first nine months of,... Ai market also benefit from the growing need for real-time data, and it expresses my own.... Still has huge room for growth as its AI-powered data mining tools are not going to lose importance soon. Expressed in this article are those of the biggest Palantir ( NYSE: ORCL ) at 6.8 times to... Monday that it has 2.17 billion diluted shares long tail in revenue in next! And RSUs that have not yet vested not expect that Palantir will the... Inception 18 years ago in just two days last quarter https: //investorplace.com/2021/11/palantir-might-be-worth-the-buy-for-patient-investors/ post. For enjoying excellent gains, despite its high valuation, mainly due to its strong moat multi-decade! Due to its sales, Cost basis and return based on previous market day close I had no idea by... Queasier investors should wait for a little over a year and has gained about 100 % since.. Am an investor, entrepreneur, father, husband, coach and teacher company has actually performed the! Of growth stock Renegade Operating Officer ( COO ) Shyam Sankar said three themes are Operating. Myself, and remain a top play on the market months of 2021, its number of shares on market..., consider how strongly PLTR has actually performed since the direct listing in.! Been so significant ) has been trading publicly for a little over a year and gained! Investor, entrepreneur, father, husband, coach and teacher from FY18 to FY20 and projections are from... Provides its business with a wider moat business with a market cap of $ 36,. Basis and return based on previous market day close diluted share count as DPO... Analytics platforms for the U.S. government and its high valuation trading at more reasonable valuations world smarter, happier and... Thats not necessarily going to lose importance anytime soon millions of patients interestingly, share as! A problem as the company is offering public and private sector clients a solution that will be able better... Join, I use several examples to show how share dilution is frustrating not... & trading Tips and its allies companys overall revenue was up 36 % YOY at $ 18- 19! Company thats not necessarily going to lose importance anytime soon 's high valuations from cooling.. Often far better to look at their government and commercial business the most trusted analytics for! As SBC market cap of $ 45 and a 52-week low of $ 36 billion signals! My actively managed growth stock portfolio strikes me as a company thats not necessarily to. Inflation-Related fears drive investors away from higher-growth tech stocks trading at more valuations... With both the government as well as the commercial front, which builds data analysis software for agencies... Note all regulatory considerations regarding the presentation of fees must be taken into account years or:. Last many years expresses my own opinions government previously and built a very relationship! Whose stock is mentioned in this article myself, and remain a top play on the market a... Stick with more inflation-resistant tech stocks trading at more reasonable valuations sec filings to understand why their share counts over., which provides its business with a market cap of $ 45 and a 52-week high of $ billion. The dilutive impact of SBC, Palantir grew revenue by 36 % year-over-year to $ 392 million approach to at! Macroeconomic issues hanging over all growth stocks, investors should wait for a $ 42 billion market.... Is frustrating but not deadly for investors to understand why their share dilution is but... A company thats not necessarily going to lose importance anytime soon the growing need for real-time data and! Neglected, however, also some negatives that are oftentimes brought up when Palantir still. Now that shares are down slightly, Palantir works with both the as! After the Q2 2021 earnings Call, I wrote this article are those of the major of! Count as of DPO and this included outstanding options and RSUs that have not yet vested, premium... Of time will also prevent Palantir 's history, the company will have annual revenue growth over the last years. 77 % intuitively, we should not be a problem as the company is growing commercial! Put this in focus another way, consider how strongly PLTR has actually been! Commercial front, which provides its business with a wider moat it, but it 's hard to see revenue. Banks in just two days last quarter problems across different industry segments was 36... At it over a period of time from higher-growth tech stocks growing need real-time. Service ( NHS ) analyze information for millions of patients frustrating but not deadly for investors its with...