Palantir Technologies: Negative Net Income Is A Result Of Positive Long-Term Investments

seekingalpha2021-11-29

Summary Palantir Technologies is a data analytics company that initiated its success through government contracts from United States Intelligence Community (USIC) agencies. The company has since ...

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精彩评论

ivy888
2021-11-29
ivy888
Ok
ivy888
2021-11-29
ivy888
Like
hellodarz888
2021-11-29
hellodarz888
Okay looks gd
BotakTur
2021-11-29
BotakTur
Ah
- AxlChoo:
  Ok
- ivy888:
  ok
- Winkingbear:
  Long term hold
- rhengheng:
  ahhh
- BotakTur:
  Ok

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The company has never reported a GAAP profit but the underlying financial strength remains strong and intimates a prosperous foreseeable future for the company. Most of the costs that currently make PLTR a loss-maker are future-oriented investment-related expenses. Despite showing improving figures for Q3 of 2021, the company’s stock declined 2%, likely in response to the high value of stock-based compensation expenses in the income statement. The stock is currently traded at $21 per share and has a market cap of over $42 billion.\nPalantir’s stock may seem volatile at first glance due to its non-profitability, but the company’s infrastructure and strategic investments exhibit very prominent and promising positive attributes for long-term returns. On top of that, while the income statement is short of investors' expectations, their balance sheet is exceptional.\nCompany Overview\nPLTR develops and deploys machine-assisted interactive data integration, management, and security software platforms for large organizations. Their range of products expands into anti-money laundering tech, cryptocurrencies, defense, energy, financial management, retail, and many other industries.\nThe company essentially operates through two segments:\n\nThe Government Segment, Palantir “Gotham”, developed to assist agencies like U.S. Food and Drug Administration (FDA), Centers for Disease Control and Prevention (CDC), and National Institutes of Health (NIH), U.S. Department of Defense (DOD) etc. in data analytics, defense operations & mission planning.\nThe Commercial Segment has the following 2 platforms to interact with high-volume information by creating a central operating system for their data:\n\n\n\nPalantir “Metropolis” was developed for hedge funds, banks, and financial services institutions.\nPalantir “Foundry” was developed for large corporate clients like Airbus, Fiat Chrysler Automobiles, Morgan Stanley, etc.\n\nThese platforms are powered by the “Apollo” software that acts like a layer between the underlying infrastructure of the core data and Palantir’s applications which let the data be easily monitored, analyzed, and manipulated.\n\nPalantir’s Future\nPLTR’s earnings guidance for the final quarter of 2021 estimates a revenue of $418 million. This is in line with their current growth measures and the increase in their customer base which increased by over 36% in Q3. This means that the company aims to achieve total revenue of $1.5 billion for the year 2021, as the company already has generated $1.1 billion in 9 months till September 2021, indicating a 30% increase from the same period last year, which PLTR also expects to stand for the next 4 years till 2025.\nThe company’s CFO, Dave Glazer, stated, “We remain focused on expansion. And so, pivoting to expansion, we have more pilots today than at any time in our history… We're scaling our investments in R&D, hiring devs, investing in new product offerings, value for crypto, the Meta-Constellation, and the commercialization of Apollo.”\nUntil recently, Palantir’s most lucrative contracts came from the government. However, the quarter 3 results showed that the commercial segment experienced higher revenue growth (37%) compared to the government sector (34%). This is a promising lead for the company’s future growth prospects as they venture into catering towards a vastly diverse field of potential customers. Their focus on expanding into the commercial sector is further evidenced by their increase of marketing expenses by over 144%.\nTheir investments\nPalantir is not only a data analytics fund but is exhibiting investment strategies similar to those used by big tech. They are making substantial investments in small but promising tech companies.\nAccording to the Guardian Fund, an investment management fund, “Palantir is becoming one of the more important global software companies… In addition, Palantir has quietly become a significant investor, investing well over USD 200 million in eight companies. Thereby, it is following the lead of companies like Tencent, Alphabet, and Shopify of establishing valuable investment portfolios.”\nAccording to Fortune, “Among the investments are robotics company Sarcos; biotechnology company Celularity; and biopharmaceutical company Roivant Sciences. Each offers a chance for Palantir to get in on the ground floor of what could be the next IBM or Tesla.”\nIt is worth noting when looking at their investments that one of their co-founders and chairman of the board, Peter Thiel, has demonstrated an incredible knack for picking winning tech companies. This includes being the first outside investor in Facebook (Meta Platforms) (NASDAQ:FB), in 2004.\nThis diverse portfolio of investments exhibits a very forward-looking strategic attitude by the company and adds a lot of viability to otherwise volatile investments.\nFundamental Financial Strength\nAs previously mentioned, PLTR hasn’t yet made any profits as most of its revenues are being reinvested in securing a long-term future. This can be ascertained by assessing easily accessible ratios and making some basic calculations. For starters, the company has a 24.4 Altman Z-Score, which is an exceptionally strong score of fundamental financial strength as usually a score of over 3 points is considered to be of good value.\nLiquidity\nAs of the most recent quarter, the company has greatly improved upon its liquidity, as indicated by its current ratio of 4.13 which is a 62% YoY Growth (2.54 for Q3 2020). This far surpasses the industry average of 1.72 and suggests a good ability to cover all of the company’s short-term liabilities. A ratio of more than double the industry median may also suggest that PLTR has a substantial ability to continue to reallocate capital into other investments.\nThe company also increased its free cash flow in YoY comparison by $605 million from negative $285 million to positive $320 million.\nProfitability\nPalantir's revenue increased by 36% from $289 in Q3 of 2020 to $392 million in Q3 of 2021 with a promising 30% leap in gross profit margin from 48% to 78% respectively. Despite the company not making any operating profits, the operating margin stably improved in each quarter to negative 23%. A major reason for PLTR making operating losses right now is the stock-based compensation it offers to its top-dollar human resource that the company plans to leverage for future growth. If we remove the stock-based compensation and on recurring expenses, then the operating margin appears to have grown from 25% in 2020 to 30% in 2021. Similarly, the company’s adjusted net income would’ve improved 51% if not for the stock-based compensation the company offers. (Palantir)\nLeverage\nThe company has a very low debt-to-equity ratio of 0.12 ($263/$2,248) and a debt-to-assets ratio of 0.08 ($263/$3,224) meaning that the company has been financing its growth through its own capital without material long-term debts, eliminating any interest and related expenses.\nValuation\nOne of the major points of concern for the investors is the high price ratios for the company’s stock, such as the P/S ratio of 27.49 and P/B ratio of 18.7 which indicate that the stock is relatively expensive compared to the returns it offers to the investors. However, I believe that the company is showing promising results and will grow into these valuations as a consequence of its strong and growing performance.\nConclusion\nPalantir offers an amazing long-term opportunity to its investors as it is well poised as a market leader in data analytics. While financial metrics like GAAP earnings may scare off some investors, a further look into the company shows that the reason for such is not poor performance, but that the company is prioritizing expansion and growth over short-term returns to secure a viable and strong future.\nIt can be reasonably expected that the strong growth and strategic investments of the company will eventually make their way to the income statement, and for that reason, I assign a bullish rating to the stock.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":600241849,"gmtCreate":1638164178811,"gmtModify":1638164179240,"author":{"id":"3579641974902127","authorId":"3579641974902127","name":"ivy888","avatar":"https://static.tigerbbs.com/10358949b7fc96b011ec29ca7fd9c9a4","vip":1,"crmLevel":1,"crmLevelSwitch":0},"htmlText":"Ok","listText":"Ok","text":"Ok","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/600241849","repostId":1173858644,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"CN"},{"id":600241158,"gmtCreate":1638164171056,"gmtModify":1638164171484,"author":{"id":"3579641974902127","authorId":"3579641974902127","name":"ivy888","avatar":"https://static.tigerbbs.com/10358949b7fc96b011ec29ca7fd9c9a4","vip":1,"crmLevel":1,"crmLevelSwitch":0},"htmlText":"Like&nbsp;","listText":"Like&nbsp;","text":"Like","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/600241158","repostId":1173858644,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"CN"},{"id":600243977,"gmtCreate":1638164002214,"gmtModify":1638164466207,"author":{"id":"3583033675115574","authorId":"3583033675115574","name":"hellodarz888","avatar":"https://static.tigerbbs.com/4e5f7fa39ea3c821aa8099f517287dcb","vip":1,"crmLevel":8,"crmLevelSwitch":0},"htmlText":"Okay looks gd","listText":"Okay looks gd","text":"Okay looks gd","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/600243977","repostId":1173858644,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"CN"},{"id":600240779,"gmtCreate":1638163805305,"gmtModify":1638163805411,"author":{"id":"4090202748844200","authorId":"4090202748844200","name":"BotakTur","avatar":"https://static.tigerbbs.com/fbfb7690052b45745da7270aa672c42d","vip":1,"crmLevel":2,"crmLevelSwitch":0},"htmlText":"Ah","listText":"Ah","text":"Ah","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":5,"repostSize":0,"link":"https://laohu8.com/post/600240779","repostId":1173858644,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":6767180,"gmtCreate":1638167552089,"gmtModify":1638167552125,"authorId":3576321881416814,"author":{"id":3576321881416814,"authorId":3576321881416814,"name":"AxlChoo","avatar":"https://static.tigerbbs.com/07cda5bcab8b688f3844cf237bffa55f","vip":1,"crmLevel":2,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":600240779,"type":1,"supId":6766715,"prevId":0,"content":"Ok","text":"Ok","html":"Ok"},{"id":6766731,"gmtCreate":1638164184799,"gmtModify":1638164184899,"authorId":3579641974902127,"author":{"id":3579641974902127,"authorId":3579641974902127,"name":"ivy888","avatar":"https://static.tigerbbs.com/10358949b7fc96b011ec29ca7fd9c9a4","vip":1,"crmLevel":1,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":600240779,"type":1,"supId":0,"prevId":0,"content":"<u>ok</u>","text":"<u>ok</u>","html":"<u>ok</u>"},{"id":6766715,"gmtCreate":1638164021245,"gmtModify":1638164021275,"authorId":3566159832938847,"author":{"id":3566159832938847,"authorId":3566159832938847,"name":"Winkingbear","avatar":"https://static.tigerbbs.com/fa59ca544b59fdba57ec5b04668be509","vip":1,"crmLevel":6,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":600240779,"type":1,"supId":0,"prevId":0,"content":"Long 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