Palantir Technologies Inc.

PLTR Details

Key Positives:   

High Valued Customers, Improved Gross Margins (78% in FY21 vs 67.7% in FY20), Strong Current Ratio (4.34x in FY21 vs Industry Median of 1.86x), Delivered strong revenue growth in recent years, Remained steadfast to its core values, Fostering a distinct culture, and Developing unique software.

Key Negatives:

Customer Concentration Risk, Seasonality Risk, Stock trading below crucial long-term support level of 200-day SMA

Palantir Technologies Inc. (NYSE: PLTR) offers solutions to help enterprises manage massive disparate data sets to obtain insight and deliver operational outcomes. Palantir Gotham (Gotham), Palantir Foundry (Foundry), and Palantir Apollo (Apollo) are its three leading software platforms. Its software is currently utilized in over 50 industries worldwide, and it has 237 clients as of December 31, 2021.

Latest News:

• Establishing New Partnerships: Palantir and Carahsoft Technology Corp. established a partnership on April 1, 2022. Carahsoft will serve as Palantir's US Federal Distributor under Palantir's new channel partner programme, making Palantir's industry-leading data operations software available to the US Federal Government.

FY21 Results:

• Robust Growth in Top Line: Due to an increase in the adoption of its goods and services inside businesses, PLTR reported a 41.11% growth in sales to USD 1.54 billion in FY21 (ending December 31, 2021) compared to USD 1.09 billion in FY20.
• Narrowed Losses: Due to increased revenue and help form strategic partnerships, the firm reduced its operating losses to USD 411.04 million in FY21 from USD 1,173.68 million in FY20.
• Strong Balance Sheet: In FY21, the company's cash position was 2,290.67 million as of December 31, 2021. Furthermore, the company's current ratio is 4.34x, also reported improvement quarter over quarter, resulting in a better balance sheet image.

Key Risks:

• Customer Concentration Risk: PLTR's top three clients accounted for 18% and 25% of revenue in FY21 and FY20. If it does not retain or build client relationships, or if critical customers cut back on their purchases, its income may suffer.

Outlook:

• Q1 FY22 Estimates: As of February 17, 2022, PLTR expects revenues of roughly USD 443 million in the first quarter of 2022, with an adjusted operating margin of around 23%.
• FY22 Estimates: Through 2025, PLTR expects a 30% or greater annual revenue rise. It also predicts an approximately 27% adjusted operating margin.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

Source: Analysis by Kalkine Group

Stock Recommendation:

Palantir has delivered strong revenue growth in recent years. The company has built out a strong presence across a broader scope of government organizations based in liberal democracies and demonstrated success with commercial organizations. And the company has remained steadfast to its core values, fostering a distinct culture, and developing unique software. We have valued the stock using the EV / Sales multiple based relative valuation methodology and arrived at a target price of USD 14.88 as of April 20, 2022.

Therefore, based on the above rationale and valuation done, we recommend a “Hold" rating on the stock at the closing price of USD 12.79 as of April 20, 2022.

1-Year Technical Price Chart (as of April 20, 2022). Source: REFINITIV, Analysis by Kalkine Group

*Note 1: The reference data in this report has been partly sourced from REFINITIV.

* Note 2: All forecasted figures and industry information have been taken from REFINITIV.

*Note 3: The report publishing date is as per the Pacific Time Zone