Should you buy Palantir stock? (June 2023)
Palantir stock analysis. PLTR stock.
Discover our research: https://www.overlookedalpha.com
When Palantir reported earnings last month, the stock jumped over 20%. That rally continued and the stock is now up 129% year to date.
That means the company is now valued at 31 billion dollars. With 2.9 billion of cash and investments and zero long-term debt, the enterprise value is 28.2 billion.
Palantir’s rally can be explained by 3 main factors. Continuing top line growth, another quarter of profitability and excitement for its generative AI platform.
Revenue in Q1 increased 18% to 525 million taking the total over the last 12 months to 2 billion and net income was positive for the second quarter in a row.
But you can see that net income over the last 12 months is still negative at minus 250 million. With ¼ of all expenses being paid in stock-based compensation, the company does have positive free cash flow to the tune of 346 million.
Growth at Palantir is still impressive with average revenue growth of 37% over the last few years and the company appears to be winning new contracts with governments on a regular basis.
However, the revenue growth rate does seem to be declining and this is still an expensive stock trading at 14 times revenue and almost 82 times free cash flow. In addition, stock-based compensation remains significant. Back in December 2020, there were 1.8 billion shares outstanding, at the end of March 2023, that number has risen above 2.1 billion.
A short sellers report last week claimed that Palantir is more of a consulting firm than a software company. It claimed Palantir invested in a number of SPACs on the basis that they would then purchase Palantir’s software.
It seems that Palantir offers founders generous exit strategies so it can acquire companies and convert them to Palantir’s products.
#pltrstock #palantirstock #stocks #investing
Discover our research: https://www.overlookedalpha.com
When Palantir reported earnings last month, the stock jumped over 20%. That rally continued and the stock is now up 129% year to date.
That means the company is now valued at 31 billion dollars. With 2.9 billion of cash and investments and zero long-term debt, the enterprise value is 28.2 billion.
Palantir’s rally can be explained by 3 main factors. Continuing top line growth, another quarter of profitability and excitement for its generative AI platform.
Revenue in Q1 increased 18% to 525 million taking the total over the last 12 months to 2 billion and net income was positive for the second quarter in a row.
But you can see that net income over the last 12 months is still negative at minus 250 million. With ¼ of all expenses being paid in stock-based compensation, the company does have positive free cash flow to the tune of 346 million.
Growth at Palantir is still impressive with average revenue growth of 37% over the last few years and the company appears to be winning new contracts with governments on a regular basis.
However, the revenue growth rate does seem to be declining and this is still an expensive stock trading at 14 times revenue and almost 82 times free cash flow. In addition, stock-based compensation remains significant. Back in December 2020, there were 1.8 billion shares outstanding, at the end of March 2023, that number has risen above 2.1 billion.
A short sellers report last week claimed that Palantir is more of a consulting firm than a software company. It claimed Palantir invested in a number of SPACs on the basis that they would then purchase Palantir’s software.
It seems that Palantir offers founders generous exit strategies so it can acquire companies and convert them to Palantir’s products.
#pltrstock #palantirstock #stocks #investing
Transcript
00:00 When Palantir reported earnings last month the stock jumped over 20%,
00:04 that rally continued and the stock is now up 129% year to date. That means the company is
00:11 now valued at $31 billion, with $2.9 billion of cash and investments and zero long term debt,
00:17 the enterprise value is $28.2 billion. Palantir's rally can be explained by
00:22 three main factors. Continuing top line revenue growth, another quarter of profitability,
00:28 and excitement for its generative AI platform. Revenue in Q1 increased 18% to $525 million,
00:36 taking the total over the last 12 months to $2 billion and net income was positive for the
00:41 second quarter in a row. But you can see that net income over the last 12 months is still negative
00:47 at -$250 million, with a quarter of all expenses being paid in stock based compensation, but the
00:54 company does have positive free cash flow to the tune of $346 million. Growth at Palantir is still
01:00 impressive with average revenue growth of 37% over the last few years and the company appears
01:06 to be winning new contracts on a regular basis. But the revenue growth rate does seem to be
01:11 declining and this is still an expensive stock, trading at 14 times revenue and almost 82 times
01:17 free cash flow. In addition, stock based compensation remains significant. Back in December 2020,
01:24 there were 1.8 billion shares outstanding. At the end of March 2023, that number had risen above
01:30 2.1 billion. A Bear report last week claimed that Palantir is more of a consulting firm than a
01:35 software company. It claimed Palantir invested in a number of SPACs on the basis that they would
01:40 then purchase Palantir's software. It seems that Palantir offers founders generous exit strategies
01:46 so it can acquire companies and convert them to Palantir's products. The Bear report also
01:51 alleged a history of employee dissatisfaction and a toxic work environment. All that said,
01:57 this information has been known for a long time and it's not had any effect on Palantir's stock.
02:02 Palantir clearly has a well regarded product as it's been awarded multiple contracts with US and
02:07 UK governments. Just this week, the company announced a new $463 million deal to put AI
02:14 into the US military, as well as a deal with Amazon's AWS. Such large deals no doubt require
02:20 some level of human input and that adds to evidence that Palantir at least has some consulting
02:25 elements. And that raises a key question over valuation. At 14 times revenue and 81 times free
02:32 cash flow, the stock is valued more like a hyper growth software business than a consulting firm.
02:38 If it truly is a consulting firm, then those multiples need to come down.
02:42 I gave Palantir a bullish score of 4 when the stock traded around $9 a share. Now that the
02:48 stock has almost doubled, I think there's a need for caution which is why I now give it a neutral
02:53 rating. But these are my personal opinions, not financial advice and I've got no position
02:57 in Palantir's stock.