Is this secretive technology play a buy?
It’s time to explore a popular technology name. Here is the break down of $PLTR, otherwise known as Palantir Technologies.
Current Price: $24.97
52/Wk High: $45.00
52/Wk Low: $8.90
Market Cap: $48.5 Billion
3 Month Performance: 16.97%
Read below for the break down!
Palantir Technologies ($PLTR) is a major software and IT services company that builds software solutions for major institutions. The company’s solutions allow institutions to better integrate data, make decisions, and create more efficient operations.
Breaking down the company by segment, Palantir operates on a two-segment basis. The first segment is Commercial, which covers customers that are within non-government and common industries.
The second segment is the Government segment in which covers US agency customers and non-US government entities.
Currently, Palantir offers three core platforms; Foundry, Gotham, and Apollo. Exploring the platforms, the Foundry platform is an operating system built for Modern Enterprises.
The Foundry OS offers customers data integration and applications, allowing enterprises to “automatically” manufacture data pipelines within hours or days.
Furthermore, the Gotham platform is an artificial intelligence operating system that was built for global decision-making and has been used within global defense agencies for over a decade.
Rounding out Palantir’s offerings the Apollo operating system was built for continuous delivery.
The Apollo platform is unique in that it provides customers with a “single control layer” that is capable of delivering new features, platform configurations, security updates, and more seamlessly on a 24/7 basis.
Palantir is led by CEO, director, and co-founder Alexander Karp, who joined the board of directors in 2003. Furthermore, the executive team is made up of leaders with vast knowledge and experience within the computer software and technology industry.
In recent news, Palantir Technologies made headlines with an interesting purchase of $50 million in gold throughout August, expanding the company’s cash levels.
According to the company, the decision to purchase gold was motivated by future economic uncertainty.
Digging into the numbers Palantir Technologies beat Q2 2021 expectations with an EPS of $0.040, better than the analyst’s EPS consensus estimate of $0.035. On a quarter-over-quarter basis, EPS remained flat.
On the flip side, revenue continued to expand, increasing by a strong 49% year-over-year to $376 million in Q2. For comparison, the Q2 2020 total revenue level was $251 million.
Analyzing the first half Palantir reported $717 million in revenue, representing 49% growth year-over-year throughout H121.
Exploring revenue metrics it is important to note that the US commercial segment delivered 90% revenue growth year-over-year while the government segment experienced 66% revenue growth year-over-year.
Shifting into profits, gross profit improved on a year-over-year basis to $284.716 million, representing a sizable improvement over the Q2 2020 gross profit level of $-183.479 million.
On the operations front, Palantir continued to run a loss, reporting a sizable $-146.148 million loss from operations. Looking back, loss from operations expanded year-over-year from the previous $-99.145 million.
Alongside operating loss, net loss continued to expand with the company reporting a Q2 net loss of $-138.580 million compared to $-110.455 million in Q2 of 2020.
Shifting back to the positives, first-half free cash flow totaled $201 million, representing a sizable improvement over the H120 FCF level of $-232 million.
Rotating into customer metrics Palantir closed 62 deals worth over $1 million throughout the quarter. Out of the 62 deals, Palantir noted that 30 are worth over $5 million and 21 of them are valued at over $10 million.
In total, Palantir added 20 net new customers throughout the quarter, representing a sizable 13% quarter-over-quarter jump in total customers. In all, Palantir ended the quarter with 169 customers.
As for booked contract value, total contract value booked totaled $925 million in Q2 of 2021, representing a 175% improvement year-over-year. Do note, total contract value booked was $337 million in Q2 of 2020.
For the sake of understanding, total contract value is defined as the total value of deals awarded to the company by commercial and government customers including existing contract options.
Shifting into the balance sheet the numbers are solid.
Total Debt: None
Total Liabilities: $1.007 Billion
Total Assets: $3.076 Billion
Cash & Short Term Inv: $2.341 Billion
On a valuation basis, Palantir does trade at a premium.
Forward Price to Earnings: 119.33x
Price to Sales: 36.70x
Price to Book: 22.77x
Price to Free Cash Flow: 790.18x
Management could be more effective.
Return on Equity: -377.08%
Return on Assets: -50.87%
Return on Invested Capital: -68.66%
Given the numbers the analysts are neutral with a mean price target of $23.80/share, representing a -4.11% downside.
The high price target is $30.00/share, representing a 20.87% upside while the low price target is $17.00/share, representing a -31.51% downside.
The big money is less involved with just 22.19% of Palantir Technologies being owned by institutions. Top holders include The Vanguard Group, Sompo Holdings, and BlackRock Institutional Trust.
While ownership is low it is also expanding. According to the latest 13F filing cycle institutional investors bought around 217 million shares of Palantir stock, meaning institutions picked up nearly 11.7% of the company throughout the most recent cycle.
On a technical basis, Palantir could be presenting an opportunity. According to the six-month charts the MACD is moving with upside momentum within a range of 0.47 down to 0.25.
The six-month charts are also indicating an RSI of 59.04 and CCI of 88.16 both of which are on the higher end. Meanwhile, the stock is significantly off its highs of $45/share and has been consolidating since March.
Sifting through investor psychology the bears believe that Palantir Technologies lacks a competitive edge, has not proven its business model, and will take far longer to be profitable than projected.
Meanwhile, the bulls believe Palantir’s unique technologies, reliable management team, and consistent growth will lead to a powerhouse company of the future.
In short, Palantir Technologies ($PLTR) is an interesting bet with expanding revenues, a growing customer base, a reliable management team, a solid balance sheet, and plenty of market space to expand within.
EAT - SLEEP - PROFIT
Disclaimer: This is not direct financial advice, simply an opinion based on independent research.