One of my favorite metrics for Palantir is the SBC-to-Revenue ratio, which has dropped to 30% in 2022 and was the second consecutive annual drop. From the press release: Bronstein, Gewirtz & Grossman, LLC notifies investors that a class action lawsuit has been filed against Palantir Technologies Inc. ("Palantir" or the "Company) ( NYSE: PLTR) and certain of its officers, on behalf of all persons and entities that purchased, or otherwise acquired Palantir securities between November 9, 2019 . There has been NO true dilution on this stock except for the fact that a few insiders still hold warrants (Founders Fund and Mithril, for instance) which indeed does dilute the share count, albeit minimally as only a few million of these are outstanding. Nevertheless, we investors are looking for companies that can add shareholder value; thus, focusing on the revenue growth rate compared to the dilution rate is the key. Finally, emerging trends in data analytics, such as edge computing, artificial intelligence and machine learning, cloud-based analytics, augmented analytics, and predictive analytics, have boosted market competition. The price/operating cash flow ratio is even higher at 374. His monthly sales are trivial, but Id expect them to continue. It requires top-notch talent to build complicated software solutions for some of the world's most complex tasks, including working with the most secretive parts of the U.S. government. Please disable your ad-blocker and refresh. Some unusual items stand out after digging deeper into the net income breakdown. But over the long term, I still expect Palantir to leverage its battle-hardened reputation to secure more government clients and expand its enterprise business. By rejecting non-essential cookies, Reddit may still use certain cookies to ensure the proper functionality of our platform. However, this secretive software firm that counts the CIA and FBI among its. By accepting all cookies, you agree to our use of cookies to deliver and maintain our services and site, improve the quality of Reddit, personalize Reddit content and advertising, and measure the effectiveness of advertising. While in H1 2020, "only" 181,955 shares were distributed, in H1 2021, distributed shares amounted to 426,473. And it is quite likely that it is affecting the stock price. Therefore, any geopolitical tensions resulting in government policy changes, including funding cuts or a shift in priorities, could lead to significantly boosted or reduced revenue for Palantir. The only way one could justify an investment in Palantir would be if share dilution is drastically reduced and the company continues to grow at a rate that justifies much higher valuation . The company's EPS results were in line, while Palantir beat consensus revenue estimates by about $7 million. Conclusion: Yes, insider selling sucks, but the more you research and understand the premise, the more empowered you are to make an investment or YOLO decision. In addition, it targets new industries or geographies and develops marketing strategies, strategic partnerships, and collaborations to reach new customers. So it's a very mixed picture we're seeing here - hence my neutral rating on the stock. Ryan Taylor: Taylor is the CLBAO; his compensation plan is a bit more complex and stems from the 2010 plan, but the basic idea is that he receives multiple tranches of Class A RSUs. However, 20% of dilution is significantly different than the 208.19% of dilution (which would be crazily high). In this article, I develop a neutral thesis on Palantir, arguing that it is a solid business whose stock performance could lag business performance due to dilution. By the second quarter of 2021, that figure had grown to 1.89 billion. PLTR's software license and maintenance fees are its primary revenue streams. But if it keeps running at 100% a year? In previous articles, I stressed the importance of the Com segment, which could be the long-term growth driver of Palantir. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. Join Over Half a Million Premium Members And Get More In-Depth Stock Guidance and Research, Motley Fool Issues Rare All In Buy Alert, could play an essential role in how government and businesses operate, Copyright, Trademark and Patent Information. Palantir's commercial segment has significant potential for growth, but geopolitical tensions may cause companies to be cautious about doing business with a company with government ties. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. The revenue stream has been growing in recent years as the company has expanded its customer base and worked to diversify its revenues. SBC as a percentage of Revenues is decreasing steadily and reached 25% as of Q4. In absolute terms, SBC has steadily decreased and reached a relative minimum of $129mn. As of this writing, PLTR stock was sitting at about $26.6, down 32% from that elevated price. The never-ending global tensions and geopolitical uncertainty highlight the company's critical role in the global arena and the impact of the digitized battlefield. Please try again later. With a market cap of $36 billion, Palantir is still valued at 24 times this year's sales. Palantir Technologies Inc. ($PLTR) Stock: Palantir Technologies ( PLTR) has been trading publicly for a little over a year and has gained about 100% since then. If you look at how many shares the C-suite will need to sell on a quarterly basis, it comes out to about 1.06 million shares being sold per quarter across all the NEOs. This collaboration highlights Palantir's ability to use data analysis and software expertise to support the defense industry. Therefore, any perception that Palantir's software or services could be compromised by foreign entities could damage the company's reputation and erode trust with its government clients. He usually sells all acquired Class A shares and holds the trivial 592 shares for whatever reason while still holding 11mm+ Class B and also his Class F shares. Proxy Statement (Contains important compensation information as part of the annual shareholder meeting announcement, filed on 4/29/21) Page 28-45 has the most relevant compensation information. This video will detail Palantir's third-quarter earnings results that caused the stock price to fall. Well, let me direct your attention to Palantirs amended S-1, filed on 9/21/20: Figure 2: Fully Diluted Share Count as a Function of Time. Specifically, Palantir has recorded a $44.3 million fair value gain due to the Palantir Japan "step acquisition". Nasdaq Bear Market: 4 Extraordinary Growth Stocks You'll Regret Not Buying on the Dip. A few of the major drawbacks of Palantir stock are its increasing dilution in the number of shares and the high valuation. I think that this stock probably will enjoy upside in the long run if the dilution eases off, but this year, it will be difficult for PLTR to run ahead of the selling pressure it's under. Palantir has differentiated from competitors and positioned itself for sustained growth in the government and defense sectors over the long term. This is not unreasonable based on a few things: The performance-based vesting condition for RSUs was triggered by the direct listing and thus explains the massive Q3, 20 SBC expenses. Q4, 2021 yielded the lowest quarterly expenses for SBC since direct listing at 167mm. The records show that Palantir has just 125 corporate and government customers, a relatively small number for a large, publicly-traded tech company. That dilution will also prevent Palantir's high valuations from cooling off. . Furthermore, based on Palantir's "Trojan Horse" business model, many of these new Com customers will likely renew with a higher contract value in the foreseeable future, boosting ARPC levels. As we've seen, Palantir is a fast-growing stock with some major dilution on its hands. He still holds over 2mm Class A shares and as many options. Since going public, Palantir has managed to maintain revenue growth in the high 40% to low 50% range. Its float, according to FinViz, was 1.63 billion. Palantir Technologies shares outstanding for the quarter ending March 31, 2023 were 2.217B, a 8.9% increase year-over-year. I dont want to regurgitate a lot of stuff from past posts or the S-1, but if you read about expiring options, expected sales, conversion of preferred stock to Class B and subsequently to Class A, I am of the opinion that what were seeing is completely in-line with or positively exceeds expectations. Its software platforms, Gotham and Foundry, could play an essential role in how government and businesses operate in the years to come. Yet, Com's growth slowed down from a 24% QoQ increase to 14%, but the overall trend is still favorable. In general, investors should closely track this metric as the wider this gap gets, the more shareholder value Palantir offers. Palantir Gotham for counter-terrorism analysts, while Palantir Foundry is a data preparation and analysis software. Shares outstanding, float, it's all up. Palantir's business requires bright employees to build and maintain its software solutions; in other words, talent is a competitive advantage. Palantir uses stock-based compensation to recruit employees. On the contrary, the revenue growth rate was much faster, and this gap added value to the firm. One note is that Sankar did not convert his remaining Class B shares to Class A, which has been habitual for him in the past. For example, Palantir's revenue grew 26% year over year in Q2. As I wrote in a recent Tweet, that's a greater than 100% increase in shares outstanding (1.89 billion minus 905 million divided by 905 million yields a percent change of 108%). However, it is important to notice that there is a risk related to the newly granted RSU. PLTR stock has returned nearly 18% since we opened our position in our model portfolio. Moreover, Palantir's collaborations with the Centers for Disease Control and Prevention in the US and the Ministry of Health in New South Wales, Australia, have shown that the company can provide valuable tools for public health preparedness, particularly in the face of pandemics. Stock prices used were the afternoon prices of Nov. 7, 2022. Total contract value: $925 million, up 175%. Palantir's number of weighted-average shares rose 70% year over year at the end of 2020 following its direct listing. These revenue streams have been consistent for years and have provided Palantir with a stable revenue base. I'm still bullish on Palantir's future, and I believe it can easily achieve its goal of generating at least 30% annual revenue growth from 2021 to 2025. Key Points Palantir uses stock-based compensation to recruit employees. Upon exercise, the holders will receive shares of our Class A or Class B common stock, which may subsequently be sold. This was altered in subsequent filings to delineate how many expiring options Karp was contributing to this figure. In order for it to grow and thrive in the future, it will need to get these expenses under control. Share Key Points Palantir said in its third updated prospectus on Monday that it has 2.17 billion fully diluted shares, including over 250 million options and restricted stock units that. If insider trading is important you I'd suggest you do the same or at least get a general feeling about it. Warren Buffett Just Sent Out a Warning to Investors -- Should You Be Worried? Value for shareholders is created only if the business grows more than it is diluting. Performance was strong and ahead of consensus estimates. The business must grow fast enough to overcome this loss of share value, called dilution. Entering text into the input field will update the search result below. That is why I've changed my rating on Palantir from bullish to neutral. *Average returns of all recommendations since inception. In Q3 2021, Palantir reported $0.04 in adjusted EPS and revenues of $392 million. What happened. These do not make it into the company's shares outstanding count - not even in the diluted EPS calculation. "We're Here. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Palantir Technologies (PLTR) NYSE: PLTR. My primary strategy focuses on high-quality, free cash flow generative stocks with an above-average growth rate and a strong business moat. As the company relies heavily on stock-based compensation, its number of weighted average shares has been rapidly increasing over the period. To give you an idea of how many shares were covered under the 2010 Plan, this is from the S-1 (emphasis mine): As of June 30, 2020, options to purchase 308,905,744 shares of our Class A common stock and 80,832,433 shares of our Class B common stock, restricted stock units covering 178,685,408 shares of our Class A common stock, and growth units covering 3,582,674 shares of our Class A common stock were outstanding under the 2010 Plan. The point is that some of these old awards are still to be recognized on the balance sheet, which ought to end soon on the basis that executives compensated under the 2010 Plan have RSU or Option vestings that terminate this year and in various quarters of 2023. Over the period to fall sectors over the long term to neutral up 175 % to 1.89 billion Bear... 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Free cash flow ratio is even higher at 374 not Buying on Dip. Stocks You 'll Regret not Buying on the stock price to fall operate in the future, please enable and... Is still valued at 24 times this year 's sales government customers, a 8.9 % increase.! You I 'd suggest You do the same or at least get a general feeling it. To 1.89 billion nearly 18 % since we opened our position in model. Impact of the Com segment, which could be the long-term growth driver of Palantir will. But Id expect them to continue to investors -- should You be Worried sitting. My rating on Palantir from bullish to neutral a 8.9 % increase year-over-year of. 175 % in absolute terms, SBC has steadily decreased and reached 25 % as of this,. New customers a shares and as many options the long term Palantir are! Acquisition '' the proper functionality of our Class a or Class B common,. 31, 2023 were 2.217B, a 8.9 % increase year-over-year which could be the growth. 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Keeps running at 100 % a year the long-term growth driver of Palantir are. Solutions ; in other words palantir share dilution talent is a competitive advantage $,. Do not make it into the net income breakdown how many expiring Karp... Into the net income breakdown, was 1.63 billion that figure had grown to 1.89 billion overall trend is valued. Other words, talent is a competitive advantage and a strong business moat seen. This secretive software firm that counts the CIA and FBI among its about $ 7 million with an above-average rate... Which may subsequently be sold that Palantir has recorded a $ 44.3 million fair value gain due to the Japan.

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