➡️ This is a step-by-step stock review to determine if Palantir (PLTR) stock is a good buy. In this article, we’ll help you understand the company, where the company is going, the competition, and the leadership. This way you can make a more confident investment decision.
Palantir Technologies is a software company that specializes in big data analytics. They were founded in 2003 and are Headquartered in Denver, Colorado. They have about 2,900 employees in office locations located in the US, UK, Germany, Denmark, United Arab Emirates, Norway, France, Sweden, Israel, Switzerland, Australia, and Japan.
Table of Contents
➡️ Goal: It’s important to know the company’s history. This helps us understand the various revenue streams, if they acquired other companies, how they grew through difficult times, and how they separated themselves from the competition.
- In 2003, Palantir was founded by Peter Thiel, Nathan Gettings, Joe Lonsdale, Stephen Cohen, and Alex Karp. Peter Thiel was a co-founder of PayPal and the first VC investor in Facebook. Some other notable investments he’s made include Stripe, SpaceX, Airbnb, Asana, Spotify, Twilio, Oculus, and more. Nathan Gettings is the CEO of RoboteX, a company that makes scouting robots for the military and law enforcement. Joe Lonsdale is a VC investor in companies including Asana, Flexport, Hive, Oculus, Wish, and more. Stephen Cohen currently serves as President, Secretary, and Director of Palantir. Alex Karp currently serves as CEO.
- Palantir was originally created by Thiel, Gettings, Lonsdale, and Cohen to help reduce fraud for PayPal. Prior to the year 2000, the fraud rate at PayPal was over 1% which is considered extremely high. In fact, the fraud rate was so high at PayPal that Visa was threatening to shut PayPal down. With this new technology developed by Thiel and his team, they were able to drop that percentage down to .55% at the end of 2000 and by the end of 2001 they were able to drop that down to .37% which was considered to be the best in the industry at the time.
- Although Karp was not the original creator of Palantir, he was brought in to lead as CEO partially because of his philosophical background. He went to school at Stanford where he became friends with Thiel. He then went on to obtain a Ph.D. in German social philosophy from the University of Frankfurt. With his philosophy education, he started getting involved with charitable causes after school which allowed him to connect with leaders within global intelligence and defense institutions. These connections led to early projects with government organizations which also helped solidify the long-term growth.
- Palantir had trouble finding initial investors. According to Karp, Sequoia Capital chairman Michael Moritz doodled through an entire meeting, and a Kleiner Perkins executive lectured the founders about the inevitable failure of the company. The only early investments were $2 million from the U.S. Central Intelligence Agency’s venture capital arm In-Q-Tel, and $30 million from Thiel himself and his VC firm, Founders Fund.
- The company’s name is derived from The Lord of the Rings where the magical palantíri were “seeing-stones,” described as indestructible balls of crystal used for communication and to see events in other parts of the world.
- Palantir has been labeled controversial. One reason, the tech was used by the US government to locate Osama bin Laden. Another reason, Palantir has come under criticism due to its partnership in developing software for US Immigration and Customs Enforcement. Palantir has responded that its software is not used to facilitate deportations. In summary, as long as Palantir continues to serve the US Government and its allies, it will be perceived as controversial.
- In 2009 and 2010, Palantir was used to uncover GhostNet and Shadow Network. GhostNet was a China-based cyber espionage network that targeted 1,295 computers in 103 countries, including the Dalai Lama’s office, a NATO computer, and various embassies. Shadow Network was also a China-based espionage operation that hacked into the Indian security and defense apparatus. Both organizations were stealing documents related to Indian security and NATO troop activity in Afghanistan.
- In 2010, Palantir announced a partnership with Reuters. Vice President Joe Biden and the Office of Management and Budget Director Peter Orszag held a press conference at the White House announcing Palantir’s success of fighting fraud with the Stimulus program.
- In 2013, it was reported that Palantir was working with 12 government organizations including the CIA, DHS, NSA, FBI, CDC, Marine Corps, Air Force, Special Operations Command, United States Military Academy, and more.
- In 2013, Palantir was approaching $1B in contracts.
- In 2013, CEO Alex Karp said Palantir would not be pursuing an IPO at this time.
- In 2014, the company was valued at $15B.
- In 2020, Palantir started working with the NHS on supporting Covid-19 efforts. That same year, Palantir developed a software called Tiberius, which was used for vaccine allocation in the US.
- In 2020, Palantir was awarded a $44M contract by the US Food and Drug Administration.
➡️ Goal: When you look at a stock, the first step is to look at the financials. Fortunately, Tykr does this for us automatically. The higher the score, the stronger the financials and the safer the investment. The higher the MOS, the higher the potential returns you can make.
- Summary: On Sale
- Score: 61/100
- MOS: 90%
- Share Price: $15
- Fair Value: $48
How does Palantir make money?
➡️ Goal: It’s important to know how a company makes money. A mature business model has multiple streams of revenue which allow the company to weather downturns in the economy.
Palantir is considered an enterprise B2B SaaS. Enterprise SaaS is highly lucrative and sticky. Contracts can be signed for sometimes as long as 7 to 10 years and those contracts can cost hundreds of thousands on up to millions of dollars per year.
Palantir has three different products including Foundry, Gotham, and Apollo.
Foundry – Commercial Customers
Foundry is a product that serves commercial customers or in other words, enterprise customers. Foundry is used to build safer cars, secure global supply chains, accelerate cancer research, and more. Some of the industries that use Foundry include anti-money laundering, energy, supply chain, and healthcare. Their customers include Merck, Airbus, and Ferrari, Morgan Stanley, Fiat Chrysler, and more.
Gotham – Government Customers
Gotham is a product that serves government customers. Gotham is used by the US government and its allies. Their customers include DHS, NSA, FBI, CDC, the US Marine Corps, the US Air Force, Special Operations Command, West Point, and the US Army.
Apollo
Palantir Apollo is a continuous delivery system that manages and deploys Gotham and Foundry. Apollo was built out of the need for customers to use multiple public and private cloud platforms as part of their infrastructure. Apollo orchestrates updates to configurations and software in the Foundry and Gotham platforms using a micro-service architecture. In other words, Apollo allows Palantir to provide software as a service (SaaS) rather than to operate as a consulting company. This is a critical platform that empowers Palantir to scale.
Palantir’s competition.
➡️ Goal: It’s important to understand who the competitors are and how their financials rank against this company. Try to find 5 other competitors to rank against based on Score. The best way to find competitors is to Google “XYZ competition” and replace XYZ with the company name. You can also go to Tykr and click on the “Similar Stocks” tab on each stock to see similar companies in the same industry.
Palantir (PLTR)
- Summary: On Sale
- Score: 61/100
- MOS: 90%
- Share Price: $8
- Fair Value: $48
- Revenue: $1.91B
- Market Cap: $17B
Alteryx (AYX)
- Summary: Overpriced
- Score: 28/100
- MOS: 0%
- Share Price: $28
- Fair Value: $68
- Revenue: $855M
- Market Cap: $4.5B
Snowflake (SNOW)
- Summary: Watch
- Score: 50/100
- MOS: 0%
- Share Price: $153
- Fair Value: $163
- Revenue: $2B
- Market Cap: $45B
Datadog (DDOG)
- Summary: Overpriced
- Score: 39/100
- MOS: 0%
- Share Price: $89
- Fair Value: $99
- Revenue: $1.6B
- Market Cap: $23B
Splunk (SPLK)
- Summary: Overpriced
- Score: 39/100
- MOS: 0%
- Share Price: $98
- Sticker Price: $105
- Revenue: $3.6B
- Market Cap: $16B
International Business Machines (IBM)
- Summary: Overpriced
- Score: 45/100
- MOS: 0%
- Share Price: $143
- Sticker Price: $144
- Revenue: $60.5B
- Market Cap: $114B
Ranking based on Score
- Palantir – 61/100
- Snowflake – 50/100
- IBM – 45/100
- Splunk – 39/100
- Datadog – 39/100
- Alteryx – 28/100
Alex Karp has been the CEO of Palantir since the company was founded. He has a background in philosophy which lead to working with non-profits which lead to working with large government organizations. This unorthodox path led to some impressive government contracts and a secure corner in the public sector market.
Karp is not the type of leader that’s trying to make everyone happy. He’s focused on serving Palantir’s customers and securing new customers in the government and enterprise space.
Overall, he’s done a good job as CEO.
Glassdoor Rating
- Glassdoor Company Rating: 4.0
- Glassdoor CEO Approval: 66%
➡️ Goal: It’s important to highlight important company-specific news as well as industry-specific news over the last month and year. We don’t need daily news on a company to make buy or sell decisions because we’re investors, not traders. Overall, we want sufficient news to understand where a company and industry are heading over the next year or few years.
Here are the highlights from the latest earnings report on August 7th, 2023.
- Matched EPS estimate of $.05.
- The customer count increased by 38%.
- Quarterly revenue increased by 26%.
- The customer count increased from 169 one year ago to 304.
- US revenue grew by 42%.
- US commercial revenue grew by 120%.
- US government revenue grew by 27%.
- 40% of business is outside the US.
- Healthcare has become a substantial and rapidly growing business, generating approximately $153 million in revenue in the first half of 2022, up from $42 million in the first half of 2020 at the onset of the pandemic.
- Palantir announced a partnership with Azule Energy, one of the largest energy companies in Angola. Palantir Foundry will help Azule Energy manage their current 200,000 barrels of daily oil production and support their growth goal of 250,000 barrels per day.
- WestTrac expanded their contract for another 5 years. WesTrac is one of the largest dealers that sells Caterpillar (CAT) equipment. The renewed agreement between these two companies has Palantir providing the company with deep data insight via its Foundry platform.
➡️ Goal: All of our homework on this company leads up to the 4M checklist. A lot of investors only look at the numbers. Yes, it’s important to look at the first M (MOS) which is the math part of investing but it’s also important to look past the numbers and also look at the business, the competition, and the management. If all 4Ms pass, we should have high confidence in buying this stock.
✅ MOS: Palantir has continued to remain On Sale since March of 2021 which is impressive on its own. It’s also important to highlight they achieved their first profitable quarter. When the market starts taking off and Palantir can continue beating EPS expectations, investors should expect this stock to take off, based solely on the numbers alone.
✅ Meaning: Data analytics is a great place to be. Government organizations and enterprise companies are always looking for ways to improve efficiencies and the best way to do that is through the analysis of data. It’s important to point out that Palantir is growing both its government and enterprise divisions. I was impressed to see the customer count has increased by 38%.
✅ Moat: About a year ago I was a little nervous with competitors such as Datadog, Snowflake, and Alteryx. Now, after the bear market has beaten down most stocks, Palantir is the only data analytics company in this group to have an On Sale summary. This shows they are doing a great job securing new contracts and keeping current customers happy.
✅ Management: Alex Karp has done a good job of leading Palantir. He does what he says he’s going to do which builds trust with investors.
8. Is Palantir (PLTR) stock a good buy?
I’m a long-term holder of Palantir and here are 3 key triggers on the next earnings report that could cause Palantir to soar! Those triggers include:
- EPS meets or exceeds $.07.
- Quarterly revenue exceeds $550M.
- Free Cash exceeds $190M.
When those 3 items happen, large institutions may start piling into this stock!
—
The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.
If you found this stock review interesting, you may also like this review on Apple.