What You Need To Know Before Buying Palantir's Stock
Is It Too Late To Buy The Stock?
Introduction
Palantir Technologies (NASDAQ: PLTR) has rapidly emerged as Wall Street’s new darling. With its cutting-edge data analytics platforms and unique approach to big data, Palantir is transforming how organizations interpret and leverage information. Palantir has been a 10-bagger since we first wrote about it in 2023, when the stock was around $6. Here are the most important things you need to know before you FOMO into buying the stocks.
The Origin of Palantir’s Name
The name “Palantir” is derived from J.R.R. Tolkien’s “The Lord of the Rings” series. In the novels, a Palantír (plural Palantíri) is a magical artefact—a “seeing stone” that allows users to communicate and see events occurring in other parts of the world. The name symbolizes the company’s mission: to provide unparalleled visibility and insights into complex data sets with predictive analysis, enabling users to see beyond the surface and make informed decisions.
What Does Palantir Do?
At its core, Palantir specializes in data integration, analysis, and visualization. The company offers multiple platforms, with two of its most popular being:
Gotham: Designed primarily for government agencies, Gotham integrates and analyzes vast amounts of data, aiding in intelligence, defence, and law enforcement operations.
Foundry: Targeted at commercial clients, Foundry transforms how organizations operate by creating a central operating system for their data. It enables users to integrate and analyze data from disparate sources, fostering collaboration and informed decision-making.
Palantir’s platforms help organizations tackle complex data challenges, from counter-terrorism efforts to optimizing supply chains.
Understanding Ontology in Palantir
Ontology in Palantir’s context refers to a structured framework that defines the relationships between different data entities within an organization. It allows for:
Seamlessly merging data from various sources.
Understanding the relationships and hierarchies within the data.
Enabling different teams to work together using a shared data model.
By leveraging ontology, Palantir ensures that data is not just collected but is meaningful and actionable, breaking down silos and fostering a unified view across the organization.
Data: The New Oil
In today’s digital age, data is the new oil—a valuable resource that, when refined and analyzed, can drive significant value for businesses. Palantir enables organizations to harness this resource by:
Identifying patterns and trends that are not immediately apparent.
Providing data-driven insights that inform strategic decision-making.
Streamlining operations by identifying bottlenecks and optimizing processes that improve efficiency.
By capitalizing on data’s potential, Palantir empowers organizations to stay competitive in an increasingly data-centric world.
Palantir’s Eccentric CEO
Alex Karp, the co-founder and CEO of Palantir, is known for his unconventional approach and outspoken views on leveraging technology to address complex global challenges, particularly in the defence and intelligence sectors. Palantir’s strategic partnerships and contracts reflect Karp’s emphasis on supporting US governments and their allies. His leadership style is characterized by:
Emphasizing Palantir’s role in national security and supporting allies.
Stressing the importance of privacy and responsible data handling.
Frequently discussing geopolitical issues and the role of technology in modern warfare.
Addressable and Serviceable Markets
Palantir operates in a vast and growing market.
Total Addressable Market (TAM): Estimates suggest that the global big data analytics market could exceed $100 billion annually, encompassing government, healthcare, finance, manufacturing, and more.
Serviceable Available Market (SAM): The SAM is substantial, potentially reaching $60 billion, and it focuses on sectors where Palantir’s solutions are most applicable. This market includes defence, intelligence, and large enterprises requiring advanced data analytics.
Palantir’s versatility allows it to tailor solutions across various industries, addressing specific data challenges and delivering measurable value. The company’s unique offerings positioned it well to capture significant market share in government and commercial sectors.
Government Sector:
Defence and Intelligence: Palantir’s platforms assist in threat analysis, mission planning, and real-time intelligence.
Law Enforcement: Aiding in criminal investigations through data integration and pattern recognition.
Public Health: Managing and analyzing data for pandemic response and healthcare logistics.
Commercial Sector:
Financial Services: Risk management, fraud detection, and compliance.
Manufacturing: Supply chain optimization and predictive maintenance.
Energy: Data-driven exploration and operational efficiency.
Can Palantir Replace SAP?
Before answering this question, it’s essential to express the core functionalities of the two companies:
SAP is primarily an enterprise resource planning (ERP) software that manages business operations and customer relations.
Palantir: Focuses on data integration and analytics, providing a platform for organizations to interpret complex data sets.
There is an argument that Palantir is not a direct replacement for SAP but can complement ERP systems by enhancing data analysis capabilities. Organizations may use Palantir alongside SAP to gain deeper insights from their operational data.
However, Palantir has significantly expanded its capabilities beyond data analytics, particularly with its Foundry platform, which now offers functionalities overlapping with traditional ERP systems like SAP. Foundry enables organizations to integrate data across various systems, optimize supply chains, and build custom operational applications tailored to business needs. In sectors like manufacturing and energy, companies have begun leveraging Palantir’s solutions to streamline operations, enhance real-time decision-making, and achieve a level of agility that traditional ERP systems may not provide.
While Palantir offers advanced data integration and analytics that can supplement or, in some cases, replace certain ERP functions, completely replacing SAP depends on an organization’s specific requirements. SAP provides a comprehensive suite of modules covering finance, human resources, procurement, and more, with established processes for enterprise-scale operations. Palantir may not fully replicate all these functions out of the box. Therefore, Palantir can serve as a modern alternative or complement to SAP, mainly where advanced analytics and customization are priorities. Organizations will most likely integrate Palantir with existing ERP systems rather than fully replace them.
Palantir’s Stock Performance
Since its Direct Public Offering (DPO) in September 2020, Palantir’s stock has experienced significant volatility:
Initial Surge: Post-DPO, the stock saw an uptick as investors were optimistic about its growth prospects.
Market Fluctuations: The stock faced periods of decline due to broader market conditions and concerns over profitability.
Recent Trends: As of November 2024, Palantir’s stock has shown resilience, supported by solid earnings reports and new government contracts.
Future Outlook:
Analysts remain cautiously optimistic, citing Palantir’s unique market position and the increasing importance of data analytics. The future opportunities for Palantir include:
Continued growth in commercial sectors and international markets.
Investment in AI and machine learning capabilities.
Collaborations with industry leaders to expand service offerings.
Palantir vs Snowflake
Palantir and Snowflake are influential companies in the data management and analytics sector, but they cater to different organizational needs with distinct approaches. Palantir specializes in platforms designed to handle complex, large-scale data sets from disparate sources. Palantir's solutions are highly customizable and are geared toward solving intricate problems that require deep analytical capabilities, often involving unstructured data and real-time intelligence.
On the other hand, Snowflake offers a cloud-based data warehousing platform known as the Snowflake Data Cloud. Snowflake provides scalable and flexible data storage solutions that allow organizations to consolidate structured and semi-structured data into a single, accessible location. Its platform is designed for ease of use and performance, enabling data engineers, analysts, and developers to perform queries and analytics efficiently without worrying about infrastructure management.
While both companies deal with data, Palantir is more oriented toward complex data analytics and operational applications, whereas Snowflake provides the foundational infrastructure for data storage and scalable access.
Palantir’s Fair Valuation
Understanding Palantir’s fair value is crucial when considering adding the stock to your portfolio. Evaluating the company’s worth involves analyzing financial statistics, applying valuation models, and estimating its intrinsic value. Below is a comprehensive view of Palantir’s valuation using information from Stock Finance Pro:
Financial Statistics
As of November 2024, here are some key financial metrics for Palantir Technologies:
Market Capitalization is approximately $150 billion, which is considerably high for an annual revenue of around $3 billion.
The price-to-sales (P/S) ratio is 57, notably higher than the industry average, reflecting investor expectations of future growth.
Price-to-Earnings (P/E) Ratio is 329, notably higher than industry averages, reflecting investor expectations of future growth.
Earnings Per Share (EPS) is $0.20, showing improvement and moving towards profitability.
Cash equivalent and short-term investments are valued at $3.7 billion, providing opportunities for growth through acquisitions.
Maximize your investment potential by using this valuation investment tool to accurately assess whether Palantir’s current stock price offers a lucrative opportunity. With precise financial modelling, Stock Finance Pro empower you to confidently determine if Palantir is a strong buy for your investment portfolio.
Using the Ticker Symbol PLTR, Stock Finance Pro imports Palantir’s financial data and instantly provides a fair value. By changing projected growth rates and discount rates in the calculator, you can recalculate the fair value of Palantir to align with your investment thesis.
Valuation Models, Intrinsic and Fair Value
Several valuation models can be employed to estimate Palantir’s fair value. An example is the Discounted Cash Flow (DCF) Analysis model, which calculates the present value of expected future cash flows. It can estimate an intrinsic value per share using assumptions like the revenue growth rate and discount rate.
Intrinsic value represents the true worth of the company’s stock based on fundamental analysis, independent of current market conditions. Factors influencing Palantir’s intrinsic value include a Strong Customer Base, Technological Edge, and Market Positioning. Given its potential for future earnings and market dominance, Palantir’s intrinsic value may be higher than the Stock Finance Pro valuation models suggest. Therefore, you may consider paying a premium after balancing growth prospects with market sentiments and inherent risks.
Analyst Consensus
As of the latest reports, analysts have varied price targets for Palantir, reflecting differing views on its growth trajectory and valuation. Some consider the stock fairly valued at current prices, while others see the potential for appreciation or caution about overvaluation.
Conclusion
Palantir Technologies stands at the forefront of data analytics, offering increasingly essential solutions in today’s data-driven world. With a visionary leader, a robust platform, and a clear mission, Palantir is continuing its ascent as a critical player in both government and commercial sectors. There is no doubt that Palantir will help to shape the future of data interpretation and utilization. However, the stock price seems too far ahead of the company’s potential.
Exact valuations vary, but the consensus is that Palantir’s innovative ventures justify a premium in its stock price. While Palantir exhibits strong growth indicators and a solid market position, estimating its fair value requires careful consideration of various financial models and market factors. You should conduct thorough due diligence, considering both quantitative metrics and qualitative aspects, such as the company’s competitive advantages and industry dynamics.
Disclaimer: This analysis is for informational purposes only and is not financial advice. Investors should consult with a financial advisor before making investment decisions.