Palantir Technologies (PLTR) Stock Report
As requested by our member, Amit - posting the full analysis here.
Overview
Palantir is a software company focused on AI-based data analytics solutions. Initially, its business catered entirely to the U.S. government, but it has steadily branched out to the private sector as well.
Key Catalysts
PLTR is a unique data asset with a particularly wide technology moat and a software platform that can address complex mission-critical use cases that no other vendor can. It is this uniqueness combined with AI euphoria sentiment among investors which are currently driving the stock.
A key downside catalyst in the longer term is the company's aggressive stock based compensation programme, which has diluted existing investors more than 10% in the past 2 years.
After reporting Q4 earnings on 05 February, PLTR recorded its 4'th profitable quarter. Its operating model reveals the company's challenge to grow revenue and gross profit much higher than operating expenses, so that EPS can be grown.
Revenue Growth
We have modeled a revenue growth of 20% / year in the next 5 years to reflect company guidance and its improved commercial prospects
Gross Profit Margin
We have modeled a 81.35% gross profit margin as economies of scale improve.
Operating Expenses
We have kept operating expenses flat, at $1.7B, representing an ever decreasing share of revenues (this measure goes from 74% to 35% in 5 years).
Shares Outstanding
We have kept the number of shares outstanding flat in our model, despite the company's history of diluting shareholders (!).
Valuation
We have used a 17.5x Enterprise Value to Sales multiple, which is very generous as it translates to a 30x EV / EBITDA multiple.
Ranking & Competition
Our system ranks PLTR fairly:
#113 out of 223 in Technology (mid)
#33 out of 86 in SaaS (mid-high)
#34 out of 149 in its Peer Group (high)Fundamentals mapped to Technical Chart
Median Price Target: $36.70
MAX Upside: $43.60
MAX Downside: $30.83
Present day "Fair Value": $32.14
Compound Annual Growth Rate: 18%
Fundamentals mapped to Technical Chart
Our Median Price Target is $22, with a 40% Compound Annual Growth Rate trading channel slope.
Conclusion & Rating
Overall, we would assign a solid BUY rating to this stock.
The only issue is the price. Initiating a position at current prices leaves an investor with more risk than reward if we keep a level head and objective view. We would gladly pick up this stock on a pullback (the max drawdown on this stock is -59% after all - that's almost 2 thirds of its value).