Palantir: A Remarkable Buying Opportunity Is Here

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Palantir: A Remarkable Buying Opportunity Is Here

seekingalpha2022-05-24

Michael Vi/iStock Editorial via Getty Images Palantir Technologies Inc.'s (NYSE:PLTR) stock nosedived following the company's recent earnings announcement, declining to an all-time low of just $6.44. ...

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Adrian LHY
·2022-05-24
Ok
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TigerHulk
·2022-05-24
I disagree, this stock is still over value.
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Investors were not pleased with Palantir's earnings miss and lower than anticipated forward guidance. Moreover, Palantir was a leading Wall St. darling growth stock when the Nasdaq bubble was inflating last year, and it's been one of the hardest-hit names as the bubble collapsed.  However, Palantir remains one of the top companies in its segment, should continue expanding rapidly, and will probably become increasingly profitable as the company advances. Additionally, the company's stock has become significantly cheaper during the tech segment's decline and now trades at a relatively attractive valuation relative to its growth rate. Palantir's stock should stabilize, recover, and move significantly higher in the coming years.  PLTR: 1-Year    PLTR (StockCharts.com) I wrote about the coming tech drop in my November article, and Palantir has witnessed one of the most significant drops out of any prominent tech company. Palantir's stock cratered by a whopping 78% from its 52-week-high, recently trading down to $6.44, well below its IPO price in 2020. However, the broader tech/growth sector experienced significant declines since last fall, and Palantir was one of the worst-hit names. Moreover, the company's stock got highly oversold in the latest leg of the correction. We see the gap lower after Palantir's earnings miss, followed by more downside in the subsequent sessions, followed by a sharp reversal. This technical dynamic may be a bullish signal that the stock has finally bottomed and may be ready to start its advance. Moreover, the CCI, RSI, and full stochastics are turning higher, illustrating a shift towards a more positive momentum. At the same time, there is no guarantee that the broader stock market and Palantir's stock won't head even lower in the short term. Therefore, we could be looking at a \"throwing out the baby with the bathwater\" scenario. Despite's Palantir's excellent growth prospects and significant profitability potential, the stock is being sold indiscriminately.  Palantir - Then And Now To illustrate how much Palantir's valuation has changed, let's travel back in time for a minute and look at Palantir's market cap history.   PLTR market cap (companiesmarketcap.com) Several months after the company's highly anticipated IPO, Palantir's market cap hit a nosebleed level of about $68 billion. While we saw some deflation after the wild rise, Palantir's market cap was as high as $56 billion last fall. Provided that Palantir should have about $2 billion in revenues this year, the stock traded at a remarkably high 28-34 times forward sales expectations around its highs last year. However, Palantir's market cap is only about $16 billion and dropped to just $13 billion when the stock hit its all-time low several days ago. Next year, Palantir should achieve approximately $2.6 billion in revenues, illustrating that the company's valuation came down to just five times forward sales expectations during the recent selloff.  Palantir's Growth Story   PLTR revenue estimates While five times forward sales may not seem like a bargain for most companies, it is not expensive for a company with Palantir's growth dynamics. The company should increase revenues by about 30% and sustain a similar growth rate through 2025. During its last earnings report, the company reiterated that it expects to maintain a revenue growth rate of 30% or greater through 2025. Therefore, Palantir should deliver approximately $4.4 billion in revenues in 2025. Moreover, the company will probably continue achieving a 20-30% revenue growth for several years beyond 2025, plausibly through 2030.  Palantir's Recent Earnings Palantir's stock got hammered after its recent earnings announcement. However, the selloff appeared unjustified. Palantir reported $446 million in revenues for Q1 (31% YoY increase), beating consensus estimates slightly. The company reported 2 cents in EPS, missing the 4-cent consensus estimate. While this was a slight miss, does a company in high growth mode need to report a profit at this stage of its development cycle? Also, does it make a significant difference if the company reports 2 or 4 cents here? Palantir illustrates that it can produce profits even while growing significantly, and it should become increasingly profitable as the company advances. The only \"disappointing\" factor in the report was the lower than anticipated revenue guidance for Q2, $470 million, vs. the $484 million figure expected by analysts. However, the company said that there is a \"wide range of potential upside\" to its guidance. Therefore, Palantir is probably being cautious, is lowballing guidance for Q2, and will likely report higher than the $470 million figure.  Also, there were plenty of positive factors to talk consider. Palantir said that it grew its commercial revenues by 54% YoY, including 136% growth in the U.S. Additionally, the company said that it increased its customer count by 86% YoY. Moreover, the company was chosen for a 5-year contract worth around $90 million by the Department of Health and Human Services earlier this month. The company expects its adjusted operating margin to be 27% for the full year. The company reiterated that it anticipates an annual revenue growth rate of 30% or greater through 2025. Additionally  Palantir added 40 net new customers in Q1 2022, a 17% QoQ increase. The company has increased its customer count by 86% YoY, illustrating remarkable growth and robust demand for Palantir's services.   Customer growth (Investors.Palantir.com) Commercial customer count continues to expand rapidly. Moreover, revenue per top customer is increasing notably. More and more enterprises are relying on Palantir's services. We also see that Palantir's customers are spending more on the company's services, implying further growth in the coming years.   Growth (Investors.Palantir.com ) Palantir continues to close deals and is growing billings. The company's closed deal count increased by 157% YoY, implying that the company should continue generating high revenue growth moving forward.   Deals and billings (Investors.Palantir.com ) The company continues putting up remarkably high margin numbers. Palantir is a software company that has the potential to become highly profitable. We see that the company continues delivering gross margin numbers north of 80%, illustrating exceptional profitability potential.   Gross margin (Investors.Palantir.com) Here's what Palantir's financials could look like in the future:    Year 2022 2023 2024 2025 2026 2027   Revenue $ 2b 2.6b 3.4b 4.4b 5.7b 7.3b   Revenue growth 30% 30% 30% 30% 28% 25%   Forward P/S ratio 7 8 9 9 8 8   Price $9 $14 $21 $27 $32 $40   Source: Author Using the company's projected 30% growth rate through 2025 and a slight drop-off through 2027 brings us to approximately $7.3 billion in revenues in 2027. My 7-9 times forward sales multiple projections are not high considering Palantir's robust growth and substantial profitability potential. Microsoft (MSFT), a software company with much slower growth, trades at about eight times forward sales. Nvidia (NVDA), a growth company with significantly slower growth, trades at approximately 12 times forward sales projections. Moreover, many other growth companies are trading at substantially higher multiples than ten times sales here. Therefore, Palantir could command a P/S multiple of 7-9 or higher in the coming years. Provided the company's stellar growth rate, its stock price could appreciate considerably over the next several years.  Risks To Palantir Despite my bullish outlook for Palantir, market participants should consider several potential risks associated with this investment. While the growth story is strong at Palantir, shares are not cheap by traditional metrics. Furthermore, the company's earnings are still minimal and may not increase as much as I envision. Moreover, if the company's growth picture were to turn less bullish, the stock could head in the wrong direction. For instance, if Palantir lost favor with the government or had a data breach, the stock could experience a notable decline. Please consider these and other risks carefully before investing in Palantir.","kind":null,"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":9026310307,"gmtCreate":1653323667009,"gmtModify":1676535260794,"author":{"id":"4108618960178170","authorId":"4108618960178170","name":"Adrian LHY","avatar":"https://community-static.tradeup.com/news/c74e00a674465d3a89953c996e2362d7","vip":1,"crmLevel":1,"crmLevelSwitch":1,"authorIdStr":"4108618960178170","idStr":"4108618960178170"},"htmlText":"Ok","listText":"Ok","text":"Ok","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9026310307","repostId":2237337536,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9026337577,"gmtCreate":1653323506002,"gmtModify":1676535260770,"author":{"id":"4111448269923362","authorId":"4111448269923362","name":"TigerHulk","avatar":"https://community-static.tradeup.com/news/9e1491ac4fc7b7459eacd64c6be410ae","vip":2,"hat":"https://static.tigerbbs.com/ae1f49570794979e009a5efdeb6f4789","crmLevel":7,"crmLevelSwitch":1,"authorIdStr":"4111448269923362","idStr":"4111448269923362"},"htmlText":"I disagree, this stock is still over value.","listText":"I disagree, this stock is still over value.","text":"I disagree, this stock is still over value.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9026337577","repostId":2237337536,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":2,"commentSize":2,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false}}