Palantir (PLTR): Resurgence and Reality Check

Palantir Technologies (PLTR) was one of the hottest stocks in 2021 amongst financial pros.

Today, it’s seeing a renaissance after blowout earnings in Q1. 

When the stock began trading in late 2020 at $10, expectations were sky high.

Shares more than quadrupled, topping out near $45. 

Then, like most high-growth tech stocks, it plunged, breaking the $10 mark in early 2022, and stayed there…until recently.

Shares have almost doubled off their lows in just a few short weeks.

And with financial pros searching out the stock at an accelerated clip, we wanted to see what all the hubbub was about.

Palantir’s Business

Founded in 2003 by a group of entrepreneurs and investors, including Peter Thiel, Palantir Technologies helps governmental organizations make sense of large and complex data sets. 

Fun Fact: The name Palantir comes from a fictional device in The Lord of the Rings that allows people to see faraway places and events.

The company offers two main products: Palantir Gotham and Palantir Foundry. 

Palantir Gotham enables analysts to integrate, visualize, and explore data from various sources, such as databases, documents, images, and videos. It is used by government agencies and defense contractors for counter-terrorism, cyber security, and intelligence operations. 

Palantir Foundry allows businesses to transform, analyze, and collaborate on data across different departments and functions. It is used by companies in various industries, such as finance, healthcare, manufacturing, and aviation.

The company has been growing rapidly in recent years, reaching over $1.9 billion in revenue in 2022.

In September 2020, it went public through a direct listing on the New York Stock Exchange under the ticker symbol PLTR.

As of May 2023, the company had a market capitalization of about $80 billion.

Like other tech companies, Palantir jumped on the AI bandwagon with its AI platforms for defense and business.

Source: Palantir Website

Financials

Source: Stock Analysis

Since its debut, Palantir has demonstrated exceptional growth, although it has not yet achieved profitability

However, the company has generated positive operating cash flows since 2021.

One of the big drags on the P&L side has been heavy stock-based compensation between $500 million to $1 billion each year.

Without that, the company would turn a profit on paper.

With no debt and over $2.5 billion in cash, Palantir has put a good chunk of its money in short-dated Treasuries.

The latest earnings beat analysts, mainly on the revenue side, with Q4 landing at $508.4 million vs. estimates of $487.8 million.

Valuation

Source: Seeking Alpha

Without positive EPS, PLTR doesn’t have a P/E trailing valuation. And the forward-looking estimates aren’t reliable.

What we can see is the price-to-cash flow is very high at 83.0x compared to any of its peers, even Splunk (SPLK), which grows at a rapid clip. Heck, the forward price-to-cash flow for PLTR is still a whopping 70.0x.

Really, there’s nothing here that says PLTR is trading at a discount, even at these depressed prices.

Growth

Source: Seeking Alpha

Palantir delivers revenue growth. But is it really that much better than its peers?

Certainly not Alteryx (AYX), though they aren’t profitable.

And SPLK shows comparable revenue and free-cash-flow growth.

Profitability

Source: Seeking Alpha

Even in terms of profitability, SPLK is a much better deal than PLTR, whether you’re looking at margins or returns.

Our Opinion 3/10

We can’t get excited about PLTR at these levels.

Even at half the current stock price, it’s still expensive.

For our money, we’d rather play SPLK with similar growth characteristics and a much better valuation.

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