Palantir (PLTR): In-depth Fundamental and Technical Analysis
Palantir is a mysterious company that helps governments and corporations integrate their data, decisions, and operations into one platform. They use big data and machine learning technology to offer solutions in both the public and private sector. While it has never been confirmed by the firm itself, it is said that Palantir played a significant role in catching Osama Bin Laden.
In this post, I'll be going over Palantir's fundamentals, financials, and technicals, in order to assess whether this company is a good buy.
This is not investment advice. This is for educational and entertainment purposes only. I am not responsible for the profits or loss generated from your investments. Trade and invest at your own risk.
Background
- Palantir’s founder is none other than Peter Thiel.
- During his Paypal days, the company faced a crisis due to a scam led by the Russian mob.
- Because of this, Paypal started nurturing groups of experts who could track and predict scam transactions.
- They developed a software that analyzes data patterns, which allowed them to identify and prevent these schemes.
- Peter Thiel thought that this software could potentially be used for many other things.
Products: Gotham and Foundry
- The CIA, they had collected a tremendous amount of data since 911, but weren't really sure of how they could utilize it to catch terrorists.
- So the CIA became Palantir’s first client, and Palantir received an investment from In-Q-Tel, which is the venture arm of the CIA.
- With the CIA’s support, they develop a software called Gotham, which allows Palantir to analyze huge data sets in real time, and visually demonstrate the result of the analysis through connective relations and patterns.
- Gotham became recognized as the best analysis tool that the government has seen, and later became used by the CDC, NSA, FBI, the Pentagon, and the Marine Corps.
- This software is used to track suspicious activities, the flow of potentially illegal funds, track missing children, or the spreading course of a disease.
- With this experience and technology, they work with JP Morgan to develop a new software called Foundry.
- Foundry is a solution for private firms that analyzes data to prevent financial fraud or illegal transactions.
Financials Analysis
- If we look at the quarterly income statement, the gross profit has dropped significantly in Q3 2020 from the 70% range to 50% range.
- This is due to the compensation provided to the company’s employees through company shares.
- Then we can also see that R&D expenses have increased significantly in the same quarter as well, and this is also due to the stock based compensation they’re giving out.
- Regardless of this outlier, Palantir is a company that invests a lot on research and development. They are spending 30% of their revenue on R&D every quarter.
- And as you can also see, Palantir is still technically not a profitable company, as their operating income is in the red.
- Let’s take a quick look at their Q4 2020 results. Last quarter, they did 322m in revenue, which is a 40% increase compared to the same quarter last year.
- In 2020 total, they did a little over a billion in revenue, which is a 47% increase compared to the revenue in 2019.
- Looking at the average revenue from Palantir’s top 20 customers, the revenue increased 34% compared to last year, marking 33.2m.
- The average revenue per customer also increased by 41%, marking 7.9m per customer on average.
- This could be interpreted as a sign that Palantir’s clients are happy with the service they get.
- In 2020, the revenue they generate from governments increased a whopping 77%, marking 610m.
- In 2019, the commercial revenue covered 53% of the entire revenue, but in 2020, the government revenue outweighed the commercial revenue in terms of proportion, as it covered a little over 60% of the entire revenue.
- The commercial revenue, on the other hand, wasn’t as impressive as the government revenue, as it only increased 22% compared to last year.
- Using the PSG ratio, I calculated the 2023 estimate for Palantir's stock price to be anywhere between $36.31 to $48.38.
Technical Analysis
- We can count Elliott Waves on Palantir's 4 Hour logarithmic chart
- We can see that the corrective abc waves have completed its formation, and that this entire chart is part of a bigger impulse wave.
- What's important to note is that the price has retraced over 61.8% from all time high levels.
- The price has managed to stay above the 0.618 fibonacci retracement support level.
- The Relative Strength Index (RSI) is trading near oversold regions
- The Moving Average Convergence Divergence (MACD) has formed a golden cross, and has started to form bullish histograms
Conclusion
Palantir is a company that is in an increasingly growing industry, but is reliant on government contracts for the time being. While this means that they are a monopoly in some way, they have also set their strategy to target commercial clients in the coming years as well. Their cutting edge technology has been approved both by government and commercial clients, and justify the growth potential of the company. Using simple assumptions to apply the PSG ratio in calculating the fair value of the company, we can estimate the stock to reach between $36.31 and $48.38. Given that the stock is currently at $24.19, this is a 41-100% upside. Technical analysis also aligns with the bull case of the valuation, indicating that the stock has recently been oversold, and that an entry around $23 would be reasonable.
If you like this educational post, please make sure to like, and follow for more quality content!
If you have any questions or comments, feel free to comment below! :)
In this post, I'll be going over Palantir's fundamentals, financials, and technicals, in order to assess whether this company is a good buy.
This is not investment advice. This is for educational and entertainment purposes only. I am not responsible for the profits or loss generated from your investments. Trade and invest at your own risk.
Background
- Palantir’s founder is none other than Peter Thiel.
- During his Paypal days, the company faced a crisis due to a scam led by the Russian mob.
- Because of this, Paypal started nurturing groups of experts who could track and predict scam transactions.
- They developed a software that analyzes data patterns, which allowed them to identify and prevent these schemes.
- Peter Thiel thought that this software could potentially be used for many other things.
Products: Gotham and Foundry
- The CIA, they had collected a tremendous amount of data since 911, but weren't really sure of how they could utilize it to catch terrorists.
- So the CIA became Palantir’s first client, and Palantir received an investment from In-Q-Tel, which is the venture arm of the CIA.
- With the CIA’s support, they develop a software called Gotham, which allows Palantir to analyze huge data sets in real time, and visually demonstrate the result of the analysis through connective relations and patterns.
- Gotham became recognized as the best analysis tool that the government has seen, and later became used by the CDC, NSA, FBI, the Pentagon, and the Marine Corps.
- This software is used to track suspicious activities, the flow of potentially illegal funds, track missing children, or the spreading course of a disease.
- With this experience and technology, they work with JP Morgan to develop a new software called Foundry.
- Foundry is a solution for private firms that analyzes data to prevent financial fraud or illegal transactions.
Financials Analysis
- If we look at the quarterly income statement, the gross profit has dropped significantly in Q3 2020 from the 70% range to 50% range.
- This is due to the compensation provided to the company’s employees through company shares.
- Then we can also see that R&D expenses have increased significantly in the same quarter as well, and this is also due to the stock based compensation they’re giving out.
- Regardless of this outlier, Palantir is a company that invests a lot on research and development. They are spending 30% of their revenue on R&D every quarter.
- And as you can also see, Palantir is still technically not a profitable company, as their operating income is in the red.
- Let’s take a quick look at their Q4 2020 results. Last quarter, they did 322m in revenue, which is a 40% increase compared to the same quarter last year.
- In 2020 total, they did a little over a billion in revenue, which is a 47% increase compared to the revenue in 2019.
- Looking at the average revenue from Palantir’s top 20 customers, the revenue increased 34% compared to last year, marking 33.2m.
- The average revenue per customer also increased by 41%, marking 7.9m per customer on average.
- This could be interpreted as a sign that Palantir’s clients are happy with the service they get.
- In 2020, the revenue they generate from governments increased a whopping 77%, marking 610m.
- In 2019, the commercial revenue covered 53% of the entire revenue, but in 2020, the government revenue outweighed the commercial revenue in terms of proportion, as it covered a little over 60% of the entire revenue.
- The commercial revenue, on the other hand, wasn’t as impressive as the government revenue, as it only increased 22% compared to last year.
- Using the PSG ratio, I calculated the 2023 estimate for Palantir's stock price to be anywhere between $36.31 to $48.38.
Technical Analysis
- We can count Elliott Waves on Palantir's 4 Hour logarithmic chart
- We can see that the corrective abc waves have completed its formation, and that this entire chart is part of a bigger impulse wave.
- What's important to note is that the price has retraced over 61.8% from all time high levels.
- The price has managed to stay above the 0.618 fibonacci retracement support level.
- The Relative Strength Index (RSI) is trading near oversold regions
- The Moving Average Convergence Divergence (MACD) has formed a golden cross, and has started to form bullish histograms
Conclusion
Palantir is a company that is in an increasingly growing industry, but is reliant on government contracts for the time being. While this means that they are a monopoly in some way, they have also set their strategy to target commercial clients in the coming years as well. Their cutting edge technology has been approved both by government and commercial clients, and justify the growth potential of the company. Using simple assumptions to apply the PSG ratio in calculating the fair value of the company, we can estimate the stock to reach between $36.31 and $48.38. Given that the stock is currently at $24.19, this is a 41-100% upside. Technical analysis also aligns with the bull case of the valuation, indicating that the stock has recently been oversold, and that an entry around $23 would be reasonable.
If you like this educational post, please make sure to like, and follow for more quality content!
If you have any questions or comments, feel free to comment below! :)
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