Palantir

The Next Big Stock - Palantir


When it comes to investing, why go for the things that earn you a mere 4% a year? Here is a multi-bagger for your consideration.

Palantir

PALANTIR

 

What is Palantir about?

It is a data platform company, albeit deemed as a controversial one. Its systems pool data into intelligent, actionable insights, and are supposed to provide a huge competitive advantage to companies that use them. Born out of necessity in its early years, Palantir powered the US government in its fight against terrorism. Funded by venture capitalist Peter Thiel, its systems have the knack to spot powerful patterns across several data sources, whilst maintaining a compliance with data privacy as well as security standards.

These are some Q2 results from data giant Palantir

  • Revenue: +49% YOY
  • Commercial revenue: +28% YOY
  • Palantir closed 62 deals of more than $1m, 30 deals of more than $5m, 21 deals of more than $10m, along with 20 new customers (growth of 13% quarter on quarter). Their commercial customers growth reached 32% quarter on quarter.
  • In terms of money management, Palantir had an adjusted Free cash flow margin of 13% along with an adjusted diluted EPS of $0.04. Their current guidance suggests a 30% 5 year revenue CAGR.

 

Total Addressable Market

Let’s take a look at the Total Addressable Market and see how “sticky” this business can land, and the amount of $$MOOLAH we can all sit on if we continue to stay long in this investment.

Assuming Palantir follows the exponential growth percentages, we can expect up to 4 times of its current value in 2025.

What is more important is how you and I see this company as an investment over the long term and whether it will become a multibagger for us. These are the criteria to look for:

 

1. Aligned with current trend.

How is Palantir solving this? There is a whole ton of data in companies that are dispersed and hence, unmonetizable. Palantir helps companies recast these siloed systems to contribute significantly to a “unified data ontology”. This allows them to transform data into actionable items within the Palantir platform. No displacements of existing systems take place. Instead, value is added with integrations of new systems as the company evolves. This allows companies to continue growing their existing systems rather than having to build from scratch all over again.

2. Sizeable market to address

Thus far the industries that use Palantir include energy, aerospace, military, consumer goods, pharmaceuticals, petroleum.

The savings for an energy company using the Palantir ERP was $57 million within 2 weeks, with an expected $1 billion annualised basis. Palantir is also connecting the entire value chain for a Fortune 100 consumer goods company, as well as linking data from more than 2000 clinical trials to uncover trends across trails and analyse outcomes for a pharmaceutical company.  

In 2019 alone, Palantir generated half a billion dollars in revenue. in its Scale phase, with a contribution margin of 55%. In H1 2020, just from the same customers, it was able to generate $296.3 million in revenue, with a contribution margin of 68%. This shows retention and growth within the customer pools.

 

Size of data market

 

 

How about room for growth?

The current market cap of ~more than $46 billion and Price/Sales ratio of 38 is quite something to stomach, but given the scale of economies deployed, the upside can be huge.

Just after market close of its H1 report, Palantir’s stock price increased by 11.36%, suggesting that investors like what they see and will continue to build on that momentum for the longer term.

 

3. Better tech?

Palantir is a data aggregator. Working primarily in the B2B realm, it empowers enterprise users in retrieving fragmented data from all the data that is available across the systems within the enterprise. It then standardises the data, ontologises it (allowing users and systems to speak the same language with regards to that data) and secures that data. Once organisational teams begin to come behind the data and collaborate, they will see where either cost savings are realised or greater revenue streams / value can be created. Greater traction will be built as the network effect is realised within the organisation.

 

Our take: You should take this data company seriously, it is at the cutting edge of the market and will continue being so for the next decade. Take a starter position, and begin to add on across time to average out.

 

 

Yours,

Chief Editor

BBA Market Perspectives

 

*Not investment advice. Do your own due diligence before you invest!

 

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Read some of their Bureau's agenda setting articles!

 

 

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