Analysis of Palantir and Positions
November 23rd, 2020
PLTR - Stock of Big Data's Future
Long Term: https://seekingalpha.com/article/4392952-palantir-valuation-opening-black-box. Last week we saw a colossal rally for the stock PLTR headed by PayPal founder Peter Thiel. Increasing over 134.9% in the last month, PLTR saw an increase in popularity on r/wallstreetbets due to users banking on the importance that big data plays in the society we live in. With contracts with the government, FBI, CIA, and COVID-19 vaccine companies, PLTR seems like a no-brainer in a world where data holds a significant amount of value.
Overview of Palntir:
Palantir is a SaaS (software as a service) company that provides governments and companies with advanced data analysis tools. In other words, Palantir gets paid to help organizations understand their disparate data in novel and valuable ways.
Palantir has three main products:
Gotham: One of Palantir's earliest products used primarily by governments to perform general purpose data analyses on a broad data set (e.g. geospatial and statistical analysis). Gotham is very useful in discovering bad actors in a system.
Foundry: A newer product targeted at businesses to help make forward-looking business decisions. Foundry is designed for ease of use by a large team of data analysts working on the same data sets, as is commonly found in companies.
Apollo: A world-class continuous deployment system, Apollo allows Palantir to rapidly deploy upgrades to their software whether it's hosted in in-house data centers or in their customers's data centers.
Fundamentals and Details for Palantir:
SOLID GROWTH: Average revenue per customer grew at an annual rate of 30% since 2009 and contribution margins (margins per product) improved by 4x since 2019. In addition, top line revenue grew by 24.7% in 2019 and is expected to grow by more than 40% in 2020 due to COVID.
SIGNIFICANT EARLY INVESTMENT, CLOSE TO PROFITABLE: bears say "NoT pRoFiTaBlE In 17 yEaRs". Bulls know this is actually bullish. Big investment = big rewards and Palantir's three flagship products are paying off now
WORLD-CLASS TECHNOLOGY: Gotham, Foundry, and Apollo are state-of-the-art technology. Just watch some of their tech talks and investor presentations. Truly impressive.
LACK OF COMPETITION: Peter Thiel thinks that competitions are for losers. Do you know what else is for losers? Being a PLTR bear. But also, PLTR has no competition. No other company is able to do broad data analysis from random data sources like they can. No other company is willing to work w/ government like PLTR is willing to.
LEGAL PRECEDENCE: PLTR literally sued the Army for not using them, and WON.
SKYWISE CASE STUDY: worked with Airbus to increase A350 production rate by 33%. Now they created an open data platform called Skywise that more than 100 airlines are using.
Bear Case for Palantir aka Playing Devils Advocate:
LOCK-UP PERIOD EXPIRY: after the first earnings call in 2021, about 1.4B new shares should hit the market. So far there're only 244 million shares on the market. That's a bigly increase to float. But I don't expect a lot more extra selling. The insiders are probably just as or more bullish about PLTR.
Last ER showed significant losses: A majority of losses last earnings report were a result of direct listing regulatory fees! These fees are not recurring, they were one time fees to take the company public. Considering this is a tech company, operating costs tend to be low and generally consistent. Therefore, as revenue scales, profit margins should theoretically soar along with it over the long term. Again, earnings are a month out so if you cannot stomach the risk of a bad earnings report you can still sell out prior to this.