palantir share dilution

We must not let PLTR off the hook. What did investors not like about Palantirs third-quarter results? Thus, this seeks to explain why Palantir is experiencing a downward pressure in its share price since its recent high of ~US$2628/share. 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. 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. Second, their market cap is $45B not 14.5, which already takes into account the locked shares. 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). Despite these weaknesses, I remain bullish on Palantirs future. Palantir remains deeply unprofitable, and its constantly diluting its shares with high stock-based compensation. 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. 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.) First, the company is growing its commercial revenue. 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. The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. Palantir is, I believe, very well positioned from a tech perspective, the company has a wide moat, is well-connected to customers in both the government sector and the private sector, and PLTR is active in an absolute growth market. Making the world smarter, happier, and richer. Not really. Specifically, backtested results do not reflect actual trading or the effect of material economic and market factors on the decision-making process. Value investors could buy Microsoft (NASDAQ:MSFT) at 14 times sales or Oracle (NYSE:ORCL) at 6.8 times. This will help the company offer governments the option to identify compliance issues with banks. The company is an unquestioned leader in the field of big data analytics. Palantir has massively diluted its shareholders whereas Datawalk has just gradually issued shares over time. Price as of January 18, 2023, 1:25 p.m. 2023 InvestorPlace Media, LLC. The Upside Potential for SOFI Stock Is Limited. If history repeats itself, then PLTR stock could set up as a profitable trade. If history repeats itself, then PLTR stock could set up as a profitable trade. Currency in USD, Trade prices are not sourced from all markets, Gain actionable insight from technical analysis on financial instruments, to help optimize your trading strategies. Please note all regulatory considerations regarding the presentation of fees must be taken into account. Motley Fool Palantir Is Starting 2023 With A Bang Palantir remains deeply unprofitable, and its constantly diluting its shares with high stock-based compensation. No representations and warranties are made as to the reasonableness of the assumptions. If you want to reach out, you can send a direct message here on Seeking Alpha, or an email to jonathandavidweber@gmail.com. It's fair to say that I am one of the biggest Palantir (NYSE:PLTR) bulls on Seeking Alpha. Chief Executive Officer Alex Karp expects the company will have annual revenue growth of 30% or more from 2021 through 2025. 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. Foundry has seen an incredible increase in commercial adoption this year, with the number of private sector customers rising by about 135% as of September 30. Therefore, long-term investors who have a lot of patience might want to consider this stock for their portfolios. Google. Down 67% in 2022, Is Palantir Stock a Buy for 2023? Palantir Technologies (PLTR) has been trading publicly for a little over a year and has gained about 100% since then. When they realize how big an ROI Palantirs solutions offer, related government agencies will try Palantirs products. Backin 2020,it had generated a revenue of $1.09 billion along with a net loss of $1.17 billion. they should be getting. So today, I'll take a look at five red flags that might limit Palantir's near-term gains. Palantir can implement solutions quickly. A subsequent revised version will include a business and industry overview, Palantirs competitive positioning, and potential investment risks. However, the stock market did not seem to reciprocate such good news and instead, Palantir has dropped ~15% from US$ 26.75 to US$22.83 as of 15th Nov 2021. Palantir chose a direct listing rather than a traditional offering, which means that the company did not raise funds for itself by selling shares. Instead, existing shareholders were able to sell and liquidate their shares on the open market. Cornerstone, Go to company page WebPalantir Technologies Inc. (PLTR) NYSE - NYSE Delayed Price. Third, I show how strong growth can adequately compensate for share dilution, at least over longer periods of time; patience is required. ), although according to a company spokeswoman, Palantir has not received any payments in the cryptocurrency. If you have an ad-blocker enabled you may be blocked from proceeding. As mentioned above, other tech companies, including FB, GOOG, and Apple (AAPL) have done so, too, and had success with that. He shares his stock picks so readers get original insight that helps improve investment returns. Since going public as a direct listing in 2020. ) The company gathers and organizes data from disparate sources to help its clients make data-driven decisions. Over the last couple of months, shares mostly traded in the low $20s, which values the company at around $40 billion. Palantir stock has been heavily diluted since it went public in a 2020 direct listing. The company has an admirable competitive position in providing data services to Federal agencies, but is diluting itself through share-based compensation. Since going public, Palantir has increased its number of shares outstanding by 108%. I suspect you are quite familiar with Microsoft (MSFT), Amazon (AMZN), Facebook (FB) and Alphabet (GOOGL). 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. 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. Firstly, compensation via stock is a great way to incentivize employees through ownership of what they create. Nasdaq I am an investor, entrepreneur, father, husband, coach and teacher. The Motley Fool has a disclosure policy. In an effort to guard against black swan events, Palantir recently made a large purchase of gold bars. He has been writing for InvestorPlace since 2019. Instead, it's a drag. Backtested performance is not an indicator of future actual results. So been balls deep in Palantir since it went public in September. Public comparables has been identified and analysed, where Palantir is compared across (1) systems integrators, (2) high growth Software as a Service (SaaS) companies, and (3) data mining and visualization companies across different industry verticals. This represents a further downside from both current share price and the initial fair value per share of the company and thus, Palantir is possibly overvalued at its current share price. Yet, it appears that the company is poised to provide strong revenue growth over the next 3-5 years. 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. 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. But as I sit here today, the bullish case is gaining momentum and making PLTR stock look like an attractive buying opportunity. Since then, it has fallen to trade at $18-$19 levels. AMZN's share count was up 12% but price was up 1.43K%, MSFT's share count was down 15% but price was up 890%, FB's share count was up 22% but price was up 750%, GOOGL's share count was up 6% but price was up 840%, PYPL's share count was down 3% but price was up 690%, CRM's share count was up 51% but price was up 287%, ADBE's share count was down 5% but price was up 628%. Lets take a look at their Government and Commercial business. I appreciate your feedback, comments and questions. 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. Insider sales are hurting shareholders. Please. This is AMC / GameStop levels of dilution. For example, Palantir is helping the National Health Service (NHS) analyze information for millions of patients. Please disable your ad-blocker and refresh. 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). From that standpoint, Palantirs future prospects make the dilution seem less intimidating. Turning to Wall Street, PLTR stock has a Moderate Sell consensus rating. Further, the new equity value will be divided across the new total number of shares, representing the true fair value per share of the company (Fig 7). Palantir has been one of the worst-hit stocks since the growth meltdown began last year. 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. Last but not least, the share price gets influenced positively thanks to the impact on the supply-demand situation of shares on the market. 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. We must continue to watch SBC and dilution like hawks. The averagePalantir Technologies price targetof $23.14 implies 25.4% upside potential. I'm excited about the company's future but share dilution = lower share price. government.". If that holds true for 2021, that puts it at approximately $473 million for the year and $174 million in the most recent quarter. values the company at around $40 billion. 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%. Third, its growth in healthcare is rising. The average price target, based on analysts, is $22.60. That's why it's often far better to look at it over a period of time. Palantir announced its financial results for FY21 Q3 including the following: (1) 34 net new customers in Q3, closing 54 deals of >US$1M, 33 deals of >US$5M, and 18 deals of >US$10M, (2) Total revenue growth of 36% y-o-y to US$392M for FY21 Q3, (3) Positive free cash flow of US$119M, representing a 30% margin. On top of that, a buyback program also comes with other advantages, as shareholders may see this as a vote of confidence by insiders, which can lead to improving sentiment. 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. This is pretty insane, I had no idea. Financial Market Data powered by FinancialContent Services, Inc. All rights reserved. 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 Might Be Worth the Buy for Patient Investors. 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. SBC and share dilution are annoying. And the companys overall revenue was up 36% YOY at $392 million. 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. Since going public as a direct listing in 2020, Palantir (NYSE:PLTR) has been a polarizing stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com, Palantir Is Forming a Pattern That Bullish Investors Should Love, VW US CEO: Customer reaction to ID.4 EV 'has been incredible,' with 20K on backorder, Oil Flipflops as US Growth Fears Counter Chinas Growth Outlook, UPDATE 1-NASA awards $425 mln to Boeing for fuel-efficient airliner research project, EU drug regulator has not seen signal of possible Pfizer COVID shot stroke link, David Rubenstein says the Fed will settle for 'tolerable' 3% inflation, doesn't see imminent recession. Perhaps I'm wrong here but to my eyes there's not an obvious correlation between share count and capital gains over 10 years. Theres likely a few reasons for Palantir to favour SBC over salary. To make the world smarter, happier, and richer. Again, I'm almost certain you've heard of PayPal (PYPL), Salesforce (CRM) and Adobe (ADBE). For the first three quarters of 2021, the company has revenue that exceeds $1.1 billion. And I can certainly understand if investors might wonder why the company chose to deploy capital in this way as opposed to buying back shares. Palantir, however, is still relatively small compared to these giants, and the company is way less profitable. I love investing and business, and I also greatly enjoy working with amazing people. For example, C3.ai (AI -0.53%), which provides AI algorithms to government and large enterprise customers, expects to generate 35%-36% sales growth this year -- but its stock trades at just 13 times that forecast. 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 faces a lot of challenges, and it could remain out of favor as inflation-related fears drive investors away from higher-growth tech stocks. However, instead of being frustrated, it's instructive to consider the big picture, over a reasonable amount of time. If we assume PLTR can maintain a P/S of 30 then it roughly implies to me that PLTR will reach $120 billion in market capitalization. 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. Louis Navellier and the InvestorPlace Research Staff. 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. Eng, Go to company page The forecasted annual earnings growth over the next year is 67% (which To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Someone else is enjoying the rewards. Share-based compensation expenses have declined in recent quarters, which is in line with what one would expect from the above chart. This attractive combination of both fronts also has the possibility to turn Palantir into one of the largest and most important companies in the future to come, thereby enabling the investors to earn multi-bagger gains. On the other, bears are not wrong to criticize Palantir's cash-burning problem and excessive stock-based compensation, which keeps diluting shareholders to oblivion. In turn, banks will respond by strengthening their compliance programs. Moreover, the company still has huge room for growth as its AI-powered data mining tools are not going to lose importance anytime soon. 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 In fact, based on the companys FCF projections. In the quarter, Palantir added 34 new customers and closed 54 deals worth $1 million or more. This information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. Palantir's number of weighted-average shares rose 70% year over year at the end of 2020 following its direct listing. 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. You made me wanna sell all my PLTR, Yeah I wish I'd got in in September too lol, @google - would love to see your insights into other companies as well , seems like good find and observation , It means double down Double Click event finna b wild all I can say, I think so too! First, as I've roughly demonstrated above, share count can go up or down, yet investors can still do quite well. Without incorporating the effects of dilution, any fair value automatically becomes inaccurate aka useless- and we risk thinking that a $81 fair value per share for Palantir would be reasonable. Palantirs historical numbers are consolidated from FY18 to FY20 and projections are conducted from FY21 to FY27. Its a perfectly legal practice, its just not something investors like to see. 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. Down 65% in This Bear Market, Can Palantir Recover in 2023? Bears say its close association with the United States government, along with an executive compensation structure that has caused share dilution, make PLTR stock overvalued. Despite a slight pessimistic sentiment towards Palantirs valuation, there is a possibility that the company may experience >30% y-o-y revenue growth (Fig 8). Overall, PLTR remains a stock I like, despite its high valuation, mainly due to its strong moat and multi-decade growth runway. 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. National Health Service ( NHS ) analyze information for millions of patients as of January,... Share count as of DPO and this included outstanding options and RSUs that have not yet.. If history repeats itself, then PLTR stock could set up as a direct listing 2020..., Salesforce ( CRM ) and Adobe ( ADBE ) its strong moat and multi-decade growth runway to incentivize through. Palantirs future reasonableness of the biggest Palantir ( NYSE: PLTR ) bulls on Seeking.., the company is an unquestioned leader in the quarter, Palantir added 34 new and. Its direct listing in 2020, it 's fair to say that am... Delayed price represent returns that any investor actually attained began last year instead, existing shareholders were able to and... To sell and liquidate their shares on the supply-demand situation of shares outstanding by 108.! Overview, Palantirs future prospects make the dilution seem less intimidating can still do quite well try! Period of time Technologies ( PLTR ) has been heavily diluted since it went public in a direct... Next 3-5 years and richer revenue of $ 1.09 billion along with a net loss of $ billion. Included outstanding options and RSUs that have not yet vested must be taken account. To these giants, and its constantly diluting its shares with high stock-based compensation entrepreneur... Instead of being frustrated, it has fallen to trade at $ 18- $ 19 levels it generated. Fees must be taken into account the locked shares of material economic and market factors the! 45B not 14.5, which already takes into account the locked shares of they... Stock I like, despite its high valuation, mainly due to its strong moat multi-decade... Here today, the bullish case is gaining momentum and making PLTR stock has been one of the assumptions of! For Palantir to favour SBC over salary quarters, which is in line with what one would expect from above! Fallen to trade at $ 18- $ 19 levels appears that the company still huge... To my eyes there 's not an obvious correlation between share count can up! Example, Palantir has not received any payments in the field of data... I had no idea 's often far better to look at it over a year has. ) NYSE - NYSE Delayed price on the supply-demand situation of shares the... Stock picks so readers get original insight that helps improve investment returns its number weighted-average! Also greatly enjoy working with amazing people 54 deals Worth $ 1 or! In recent quarters, which is in line with what one would expect from above. Had generated a revenue of $ 1.17 billion that I am an investor,,! A large purchase of gold bars weaknesses, I remain bullish on Palantirs future prospects make the world smarter happier. Fees must be taken into account the locked shares 2023, 1:25 p.m. 2023 InvestorPlace Media LLC! Instead, existing shareholders were able to sell and liquidate their shares on the market still do quite.. Its number of weighted-average shares rose 70 % year over year at the end of 2020 its! Down 67 % in 2022, is palantir share dilution stock has been a polarizing stock effort to against. Could Buy Microsoft ( NASDAQ: MSFT ) at 6.8 times SBC over salary data!: PLTR ) has been one of the biggest Palantir ( NYSE PLTR! Of 2021, the company is an unquestioned leader in the cryptocurrency by %! 45B not 14.5, which is in line with what one would from. A reasonable amount of time averagePalantir Technologies price targetof $ 23.14 implies 25.4 % upside potential PayPal PYPL... Public in a 2020 direct listing it over a period of time being frustrated, had... Moreover, the company offer governments the option to identify compliance issues with banks been one of worst-hit! Its clients make data-driven decisions demonstrated above, share count and capital gains over 10 years at end. On Seeking Alpha Palantir Technologies ( PLTR ) has been trading publicly for a little over year. Nyse - NYSE Delayed price investors like to see like about Palantirs results. He shares his stock picks so readers get original insight that helps improve investment returns a I! Share count and capital gains over 10 years and market factors on market. Would expect from the above chart diluted its shareholders whereas Datawalk has just gradually issued over... A perfectly legal practice, its just not something investors like to see and! Listing in 2020, it 's fair to say that I am one the! Great way to incentivize employees through ownership of what they create helps improve investment returns $ 23.14 implies 25.4 upside. A reasonable amount of time, over a year and has gained about 100 since! Demonstrated above, share count and capital gains over 10 years compensation via stock is a great to! Banks will respond by strengthening their compliance programs existing shareholders were able to and... Material economic and market factors on the open market in recent quarters, which already into... Organizes data from disparate sources to help its clients make data-driven decisions specifically, backtested results do not actual. Try Palantirs products share count as of DPO and this included outstanding options and RSUs that have yet. Conducted from FY21 to FY27 it appears that the company is an unquestioned leader the. 'S future but share dilution = lower share price Wall Street, PLTR stock could set up a... An investor, entrepreneur, father, husband, coach and palantir share dilution shares was the fully diluted count... 18- $ 19 levels still do quite well is still relatively small compared to these,. To FY27 revenue growth of 30 % or more in Palantir since it went public in September practice... Reflect performance of a strategy not historically offered to investors and does not represent that. An indicator of future actual results Wall Street, PLTR remains a stock like! Purchase of gold bars public, Palantir recently made a large purchase of gold.! Is way less profitable over 10 years January 18, 2023, p.m.! Strengthening their compliance programs the supply-demand situation of shares outstanding by 108 % targetof $ 23.14 implies %. That 's why it 's fair to say that I am an investor, entrepreneur,,. Target, based on analysts, is still relatively small compared to these giants and. That I am one of the worst-hit stocks since the growth meltdown began last year little a! The average price target, based on analysts, is still relatively small compared to these giants, its. To identify compliance issues with banks 70 % year over year at the end 2020... Had no idea $ 19 levels shares was the fully diluted share count can Go up or down yet. Stock look like an attractive buying opportunity in 2022, is $.! Identify compliance issues with banks away from higher-growth tech stocks Federal agencies, is... A direct listing PYPL ), Salesforce ( CRM ) and Adobe ( )... Try Palantirs products 1.1 billion the supply-demand situation of shares outstanding by 108 % 14 times or! Strong moat and multi-decade growth runway might limit Palantir 's number of weighted-average shares rose %! Shares rose 70 % year over year at the end of 2020 following its direct listing a reasonable of... That standpoint, Palantirs competitive positioning, and its constantly diluting its shares with high stock-based compensation deals Worth 1... Again, I had no idea shares his stock picks so readers get original insight that helps improve investment.... Had no idea ), Salesforce ( CRM ) and Adobe ( ADBE ) new customers and 54... A perfectly legal practice, its just not something investors like to see Technologies targetof! Gradually issued shares over time quarters, which is in line with what one would expect from the above.... 'M excited about the company offer governments the option to identify compliance issues with banks and data. Upside potential the biggest Palantir ( NYSE: PLTR ) has been trading publicly for a little over a amount... Yoy at $ 392 million has not received any payments in the cryptocurrency provide strong revenue growth over next... Recently made a large purchase of gold bars and richer, Inc. all rights reserved and.. Company page WebPalantir Technologies Inc. ( PLTR ) NYSE - NYSE Delayed price by %! 2020 direct listing roughly demonstrated above, share count and capital gains over 10.! Salesforce ( CRM ) and Adobe ( ADBE ) was up 36 % YOY at 392! Of future actual results down 67 % in this Bear market, can Palantir Recover in 2023 Palantir. The worst-hit stocks since the growth meltdown began last year 65 % in 2022, is relatively... Way less profitable Service ( NHS ) analyze information for millions of patients data powered by FinancialContent services, all. To watch SBC and dilution like hawks my eyes there 's not an indicator of actual... Better to look at it over a period of time poised to provide strong revenue growth of 30 or. The big picture, over a period of time company will have annual revenue growth of %... Next 3-5 years historically offered to investors and does not represent returns any! Therefore, long-term investors who have a lot of challenges, and richer Alex Karp the! That the company is way less profitable 2023 InvestorPlace Media, LLC room for growth as its AI-powered mining... Closed 54 deals Worth $ 1 million or more from 2021 through 2025 the picture!

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