Palantir: This Is Getting Ridiculous

seekingalpha2022-05-23

SummaryPalantir has reported decent Q1 earnings results with a double-digit revenue growth rate.The market currently underestimates Palantir’s ability to expand its business in the following quarters,...

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Comments

VivianChua
2022-05-24
VivianChua
Good long term💚💚💚
Nanamoney
2022-05-24
Nanamoney
Another case again. QR positive and share price never go up .[Anger] [Spurting]
AuntieAaA
2022-05-24
AuntieAaA
GOOD
Simonnov
2022-05-24
Simonnov
Ic
Jess261
2022-05-24
Jess261
Okay
Shirley Soh
2022-05-24
Shirley Soh
Ok

Leave a comment

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The Q1 earnings report, which was released recently, showed that Palantir is on target to meet its goal of growing its revenues by 30% annually thanks to the signing of new contracts with recently acquired customers in the defense and commercial fields. For that reason, I have recently increased my position in the business, as Palantir has proven that it can continue to grow at a double-digit rate even in the current volatile environment.Geopolitical Opportunities Await For PalantirAs I've already mentioned in my previous articles on the company, Palantir provides a wide variety of AI-powered solutions to government organizations and private enterprises. As the new Q1 earnings report has come out, now is a good time to highlight some of the recent developments and expand my bullish thesis. Given the complexity of Palantir's business, I will discuss only the company's capabilities and opportunities in the defense sector and leave the signing of new deals with non-governmental entities for another day. So, let's begin.The Q1 earnings report, which came out earlier this month, has once again shown that Palantir still is one of the fastest-growing tech companies on the market right now. During the three-month period, its revenues have increased by 31% Y/Y to $446 million, while the revenue from its defense business improved by 16% Y/Y to $241 million and accounted for the majority of the overall revenues. In addition, the average revenue per customer at the end of Q1 increased to $10 million, up from $7.9 million a year ago. Such a successful performance showed that the company could thrive in the current environment where there's too much uncertainty.As the world continues to monitor Ukraine war, Palantir is currently indirectly exposed to the war in one way or the other. In its Q1 presentation, the company noted that its software is currently used to help European governments efficiently provide help to Ukrainian refugees, while its AI-based solutions helped to track $200 billion worth of hidden Russian assets. In addition, as the U.S. administration has been warning its allies in late 2021 that the Ukraine war is imminent, Palantir has been monitoring Russia's military activity at Ukraine's border and saw firsthand that something is about to happen. This was possible thanks to the launch of Palantir MetaConstellation in 2021, which helps the company's defense clients to gather and organize data that was collected by different satellites and make the decision-making process much easier efficient for them. Palantir's customers can schedule the coverage of a specific area on Earth to gather raw data, which is later tailored by AI models to meet the client's needs. One of the most successful MetaConstellation projects is the Global Information Dominance Experiment by the U.S. Northern Command, which was used to locate competitor activities around the targeted area last year.Going forward, AI-based solutions will play an even greater and more important role in the security and defense sectors and Palantir's indirect involvement in the war in Ukraine shows that the company is capable of providing such solutions for different governments and non-state actors. Given the fact that military spending is now at an all-time high around the globe and will continue to increase due to the growth of geopolitical risks, Palantir will be able to benefit from all of this. Just recently, the company has expanded its presence in Europe by moving some of its European security operations to the UK and signing a £10 million contract extension with the UK Royal Navy to provide software services. In addition, as Europe's economic powerhouse Germany recently announced its commitment to spend €100 billion of Europe on its own defense in the following years, Palantir has already started to penetrate the country's security market by working with its regional security agencies, which was announced in the Q1 conference call.Back in the United States Palantir has also improved its position and established stronger ties with defense agencies. Last year the company began cooperating with the United States Space Force by providing it software solutions to improve the situational awareness through the Warp Core platform for $32.5 million. The contract with the Space Force was extended a couple of times in late 2021, which helped Palantir generate a total of $91.5 million so far from the one defense agency in less than a year. This proves that the company's solutions for the defense sector are in high demand and it's one of the reasons why in the latest earnings report Palantir announced that its customer count increased by 86% Y/Y to 277 customers, 40 of which were signed in the first three months of this year. As Pentagon is about to have its highest annual budget in history, it becomes almost a certainty that Palantir will be able to receive new contracts from the state due to the effectiveness of its software and its close ties with the U.S. government.All of these developments clearly show that Palantir has already achieved significant progress in recent quarters and everything currently points out to the fact that it'll be able to continue to grow at a double-digit rate as defense spending surges around the globe and the AI-based security solutions are increasing in demand. Despite this, the market has poorly reacted to all of this and in my opinion unjustifiably crushed Palantir's stock. For Q2 alone, Palantir's base case scenario forecasts revenue growth of 25% Y/Y to $470 million. In addition, with $2.3 billion in cash reserves, no debt, and $3.5 billion in remaining deal value at the end of March, Palantir's balance sheet looks solid while growth opportunities appear to be endless. That's why even though the company trades at 9 times its sales, the double-digit revenue growth rate could justify the current valuation and even help the stock to appreciate in the long run. The street already believes that Palantir is currently undervalued and gives it a consensus price target of $12.35 per share, up over 50% from the current market price.RiskDespite all of those opportunities, there's still a risk that Palantir's stock will continue to trade at distressed levels for quite some time. Since the beginning of the year, we saw how institutional investors began to rebalance their portfolios by dumping growth names and acquiring value stocks to better prepare for a possible recession that could start next year. Wells Fargo already makes a recession a base case scenario in the future, while Goldman Sachs believes that the growth of the economy could slow down by the end of the year.The good news is that there are no signs of an upcoming recession at this stage, as the majority of companies reported record growth numbers in Q1 and beat most of the forecasts. In addition, it seems that inflation peaked in March and the hawkish monetary policy could prevent the further depreciation of the United States dollar.Nevertheless, there's no denying that things could dramatically change by the end of this year if high energy costs along with high product prices remain and create more uncertainty in the markets. Therefore, a possible recession in the foreseeable future is a major risk that should be considered when deciding whether to invest or not in Palantir and other growth names for that matter.The Bottom LineCurrently, we're witnessing the biggest war on the European continent since World War 2, and Palantir is indirectly engaged in it through its AI-based software solutions. No matter how and when the Ukraine war ends, it's almost a certainty at this stage that the defense spending will continue to surge in the foreseeable future, making it possible for Palantir to expand its presence in the current and new markets in the long run. Therefore, I believe that the company currently trades at ridiculously cheap levels and has all the possibilities to continue to show an outstanding performance in the following quarters, as its software solutions continue to be in high demand. For that reason, I've recently increased my position in Palantir, and in another article on the company, I plan to tackle other important issues such as SBC, insider selling, and Palantir's commercial business to further expand my bullish thesis.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":9026652050,"gmtCreate":1653370543870,"gmtModify":1676535270015,"author":{"id":"3580011914778910","authorId":"3580011914778910","name":"VivianChua","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":5,"crmLevelSwitch":1,"authorIdStr":"3580011914778910","idStr":"3580011914778910"},"htmlText":"Good long term💚💚💚","listText":"Good long term💚💚💚","text":"Good long term💚💚💚","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9026652050","repostId":2237843290,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9026669397,"gmtCreate":1653366207719,"gmtModify":1676535269326,"author":{"id":"3582942911161794","authorId":"3582942911161794","name":"Nanamoney","avatar":"https://static.tigerbbs.com/8624e691b889b8bc4515d1884744eb5a","vip":1,"crmLevel":5,"crmLevelSwitch":1,"authorIdStr":"3582942911161794","idStr":"3582942911161794"},"htmlText":"Another case again. QR positive and share price never go up .[Anger]&nbsp;[Spurting]&nbsp;","listText":"Another case again. QR positive and share price never go up .[Anger]&nbsp;[Spurting]&nbsp;","text":"Another case again. QR positive and share price never go up .[Anger] [Spurting]","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9026669397","repostId":2237843290,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9026614598,"gmtCreate":1653364492914,"gmtModify":1676535269009,"author":{"id":"3583049143664216","authorId":"3583049143664216","name":"AuntieAaA","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":2,"crmLevelSwitch":0,"authorIdStr":"3583049143664216","idStr":"3583049143664216"},"htmlText":"GOOD","listText":"GOOD","text":"GOOD","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9026614598","repostId":2237843290,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9026699014,"gmtCreate":1653360669538,"gmtModify":1676535268266,"author":{"id":"4097750438225520","authorId":"4097750438225520","name":"Simonnov","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":2,"crmLevelSwitch":0,"authorIdStr":"4097750438225520","idStr":"4097750438225520"},"htmlText":"Ic","listText":"Ic","text":"Ic","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9026699014","repostId":2237843290,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9026866423,"gmtCreate":1653355544762,"gmtModify":1676535266793,"author":{"id":"3586490638953193","authorId":"3586490638953193","name":"Jess261","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":4,"crmLevelSwitch":0,"authorIdStr":"3586490638953193","idStr":"3586490638953193"},"htmlText":"Okay","listText":"Okay","text":"Okay","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9026866423","repostId":2237843290,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9026882488,"gmtCreate":1653354652544,"gmtModify":1676535266420,"author":{"id":"4100664503126340","authorId":"4100664503126340","name":"Shirley Soh","avatar":"https://community-static.tradeup.com/news/784ec5f33096066f43c22d219e548bac","vip":1,"crmLevel":8,"crmLevelSwitch":1,"authorIdStr":"4100664503126340","idStr":"4100664503126340"},"htmlText":"Ok","listText":"Ok","text":"Ok","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9026882488","repostId":2237843290,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":599,"commentSize":71,"repostSize":0,"favoriteSize":2,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2237843290"}