Summary
Palantir Technologies has expanded its collaboration with Carahsoft Technology, allowing U.S. government agencies, state and local governments, educational entities, and Canadian Government and Defense Industrial Base organizations to leverage its Apollo Platform.
PLTR has also partnered with AirMatrix, integrating its Foundry for Builders into AirMatrix's operations to enhance airspace security, including threat detection and risk mitigation.
Despite its high valuation, Palantir's financial health is robust, with $0 debt, almost 80% gross margins, a cash reserve of $2.9 billion, and projected earnings growth of 55.4%.
Palantir FedStart Product will help commercial customers get FedRamp IL5 certified much faster and manage the authorization to operate.
The Company will continue to create new products from their platforms which will solve industry-wide problems allowing them to capture markets with their data intelligence and AI.
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What Is the Goal of This Article?
There are several goals I have for this article which may help shape a new perspective on Palantir (NYSE:PLTR $Palantir Technologies Inc.(PLTR)$ ) for bulls, bears, and those who have never heard of the company. My first goal is to establish the landscape Palantir is operating in and to update my readers on the new announcements made by Palantir regarding Carahsoft and AirMatrix.
The next objective of this article is to help the bears and potential new investors of Palantir to consider why Palantir has such a high valuation and why they should not let that be the reason they don't invest in the company. I also want to cover the large potential impact of their new FedStart Program and how later next year it will include IL6 certification for customers.
My final goal for this article is to provide insights to new investors on the financial health of Palantir, how some DCF models show Palantir still undervalued, but that the most important thing investors need to understand is the value the company's products create for their customers.
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DCF Model on PLTR from Simply Wall. St. (Simply Wall St. App)
The Year of AI and Proving Value Realized
The narratives around this so-called enigmatic AI software company have caused controversy and misunderstanding of the company for years. However, this is mainly due to people not taking the time to research and understand what problems Palantir truly solves and how their technology operates. It literally is explained on their website.
It's no secret that AI is the new buzzword of the year, but I believe it is for good reason, it is because of the implications it will have over the future. Everyone wants to say their company uses or produces AI or they have AI initiatives moving forward. I believe there will be an elite group of companies that generate the most value from AI and are able to prove this value without a doubt and Palantir Technologies is one of them.
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$40M in Annual Savings in 4 Months with Palantir Foundry (Tyson Foods Preso at Palantir Foundry Con 2022)
However, many institutional and new retail investors are deterred by Palantir's seemingly perceived high valuation and stock-based compensation (which is decreasing), but perhaps they are missing the bigger picture - a company relentlessly solving pressing, complex problems and pushing the boundaries of innovation. If the problems are important enough to solve and the solutions provided can show an exponential ROI, customers will pay and stay. This is what we will examine later on, why this "high valuation" should not deter investors, and instead, be seen as a testament to Palantir's future potential.
Strategic Partnerships: Enhancing Public Sector Solutions and Global Drone Operations
In an effort to bring its Apollo Platform closer to the public sector, Palantir expanded its collaboration Thursday with Carahsoft Technology. Now, all U.S. government agencies, state and local governments, educational entities, and Canadian Government and Defense Industrial Base organizations can leverage the platform via Carahsoft's reseller partners, GSA Schedule, and other contracts. This partnership cements Palantir's role as a critical player in modernizing government operations and improving public sector efficiency.
The expansion of the collaboration between Palantir and Carahsoft not only underlines the value proposition of Palantir's Apollo platform to public sector entities but also demonstrates the company's commitment to increasing the accessibility of their offerings. This is certainly an important update to consider when investors look at the context of Palantir's growth prospects in this sector.
Another partnership was announced today that came from AirMatrix, a trailblazer in airspace infrastructure technology. By integrating Palantir Foundry into its operations, AirMatrix can now provide its clients - ranging from city managers and airspace regulators to defense organizations - with enhanced airspace security, including threat detection and risk mitigation. This partnership underlines Palantir's commitment to solving complex global problems using cutting-edge technology.
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Palladium UTM Built on Palantir Foundry (AirMatrix Website)
AirMatrix joins a host of other Canadian businesses who work with Palantir from energy to financial services and manufacturing. Leveraging the Foundry for Builders Program, AirMatrix has begun enhancing both of its commercial drone software products, Libra, as well as Palladium. Libra is an advanced airspace management platform which gives civil authorities the ability to scale and manage drone traffic effectively, while generating revenue as commercial drones take to the sky. Palladium is a software product which empowers drone operators to scale operations, fly drones legally, plan and execute missions, as well as manage 3D-optimized routes to the millimeter level.
"Palantir's commitment to solving the world's most complex problems is key to the partnership, as drone technology is increasingly being employed not only for beneficial outcomes in commercial applications but also for nefarious or illicit purposes," said David MacNaughton, Director & Head of Palantir Technologies Canada. "At Palantir Canada, we are excited to help AirMatrix accelerate and scale its business, leveraging local engineering expertise to help secure our airspace."
This is another significant development, showing Palantir's entry into the drone technology space, through the partnership with AirMatrix. The application of Palantir Foundry in such a context, especially in managing complex data landscapes related to drone operations, showcases the platform's versatility and scalability. By collaborating with AirMatrix, Palantir is essentially participating in shaping the future of drone operations, airspace regulation, and security. This not only expands their client base and potential revenue streams but also establishes their presence in a rapidly growing sector.
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Palantir Privacy and Security First Model (Palantir Website)
An Unwavering Focus on Security and Privacy
Palantir's success is partly attributed to its steadfast commitment to security and privacy. The firm has laid out four security principles:
Individuals and organizations should have control over their data.
Privacy design must evolve alongside technology.
Privacy should be built into software.
The path to privacy involves robust public-private cooperation.
This strong stance highlights Palantir's dedication to creating a future where technology enhances, rather than threatens, privacy and civil liberties. As AI utilization ramps up and commercial entities trying to meet government compliances, Palantir will continue to have a role in how organizations secure their data.
Impressive Government Relationships and FedStart Program
From its inception, Palantir has built robust relationships within government circles. The firm's Gotham platform, a bespoke data integration and analysis software, has been utilized by numerous defense and intelligence agencies. It has proven instrumental in tackling terrorism, fraud, and other significant threats. Palantir's reputation as a trusted partner to government agencies is a strong testimony to its efficacy.
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Benefits of Palantir FedStart Program (Palantir Website)
However, a new initiative is set to further boost Palantir's standing in the public sector. Palantir's recently launched FedStart program is an ingenious solution to one of the most significant hurdles in public-private partnerships - achieving Federal Risk and Authorization Management Program (FedRAMP) certification.
FedRAMP, a government-wide program, provides a standardized approach to security assessment, authorization, and continuous monitoring for cloud products and services. However, the certification process is notoriously time-consuming and complex. Palantir's FedStart program is designed to help commercial companies expedite their FedRAMP certification process by leveraging Palantir's pre-existing government-approved infrastructure.
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How Palantir FedStart Works (Palantir Website)
The FedStart initiative is a strategic masterstroke. By assisting companies to attain FedRAMP certification, Palantir cements its reputation as an essential cog in the government-industrial machine. Furthermore, this move increases Palantir's footprint in the public sector by deepening its relationships with other contractors in the field, creating a virtuous cycle of growth and revenue generation.
Cutting-edge AI Technology and Commercial Prospects
On the commercial side, Palantir Foundry continues to empower a growing number of corporations with its state-of-the-art AI technology. Foundry excels at unifying, refining, and making sense of data from diverse sources, enabling organizations to glean invaluable insights from complex datasets. This ability helps corporations to streamline operations, enhance customer experiences, and ultimately, improve bottom-line performance.
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Palantir Foundry Model Overview (Palantir Website)
Palantir's AI capabilities don't just stop at providing business intelligence. The company also plays a vital role in predictive analytics, a field that is seeing an increased demand as businesses are keen to leverage data for future strategic planning. By utilizing machine learning and advanced algorithms, Palantir's technology helps businesses foresee potential challenges, identify opportunities, and optimize their decision-making processes.
Moreover, Foundry's scalable and modular design allows it to cater to a wide array of industries, from healthcare and energy to manufacturing and finance. The versatility of the platform opens doors to a broad market and the ability to create new specific modularized products for specific problems, increasing Palantir's revenue potential.
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Palantir AIP Platform Integrates with Foundry, Gotham, and Apollo (Palantir Q1 2023 Earnings Release)
Palantir has also announced Palantir AIP (Artificial Intelligence Platform), their fourth major product release, which enables customers to deploy large language models and other AI on their private network safely and securely. With this platform, clients retain full control over AI access, enabling AI agents to understand, recommend, and trigger business processes. Notable features include 'AIP Assist' for human-AI collaboration, 'AIP Automate' for real-time AI agent activity monitoring, and 'Digital Footprint' for auditing all AI prompts, outputs, and actions. Palantir has already expressed publicly how much demand for learning more about Palantir this platform has created and leading to new sales opportunities.
This company continues to create new products from the capabilities within Foundry, Gotham, Apollo, and now AIP to solve meaningful problems for industries. Remember when Alex Karp said Palantir Foundry is essentially like 400+ products in one. This has been proven by the continued revenue expansion Palantir has captured from their top 25 accounts whom have been customers for several years.
Financial Health: Backing Up Potential with Strong Performance
Despite its seemingly high stock valuation, a discounted cash flow analysis by Simply Wall St. found Palantir to be trading 31% below its fair value. The company has also showcased impressive financials, boasting $0 debt, almost 80% gross margins, and a cash reserve of $2.9 billion. Revenue and earnings growth have been impressive, with earnings projected to grow 55.5% annually over the next three years.
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Palantir Cash on Hand after Q1 2023 (Palantir Q1 2023 Earnings Presentation)
The robustness of Palantir's financial health is further emphasized by the company's performance obligations of $936M, a significant portion of which could be recognized in the upcoming year. With no outstanding debt, impressive growth rates, and a strong cash position, Palantir exemplifies financial stability, adding another layer of attraction for potential investors.
Value Realization and Long-term Sustainability
The essence of Palantir's success lies in the value realization it creates for its customers. Data is only as good as the insights derived from it, and this is where Palantir's AI expertise comes into play. By extracting tangible, actionable intelligence from complex datasets, Palantir enables its clients to make more informed decisions, optimize operations, and achieve strategic objectives more efficiently.
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HCA Healthcare Results with Palantir (AIPCon 2023 - Palantir HCA Presentation)
This value creation isn't just a one-off benefit; it's a recurring advantage that becomes more pronounced over time as organizations continue to utilize Palantir's platforms. The ongoing reliance on Palantir's tools for vital decision-making processes creates a sticky customer base, which translates to steady, recurring revenue for the company.
Despite the lack of institutional investments in Palantir currently and concerns with their current valuation, I believe Palantir's unique blend of cutting-edge technology, strong government & commercial relationships, and clear value creation for clients position the company as an exciting long-term investment opportunity for decades to come. Candidly Palantir is my second largest position in my investment portfolio, and I continue to add to it, so you may feel of course this author would say this and he appears very biased.
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Palantir Third Party Recognition Worldwide in AI (Palantir Q1 2023 Earnings Deck)
However, as the world continues to generate an ever-increasing amount of data, the need for intelligent, secure, and scalable data analytics platforms like those offered by Palantir will only grow. In my opinion investing in Palantir is, therefore, not just an investment in a single company, but a stake in the future of data intelligence. I encourage all my readers to watch the videos on their website, watch videos of their leadership team, and review the whitepapers on their technology and you will see this is an AI company that has proven value creation for its customers in a wide variety of industries and government.
Sometimes, great companies are never cheap because they continually innovate to create new value, and Palantir is undoubtedly one of them.
Source: seeking alpha
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