To The Moon

On 05 Feb 2024, the shares of $Palantir Technologies Inc.(PLTR)$ soared while market analysts started to debate whether upside from generative artificial intelligence deployments has kicked in for the maker of data analytics software.

Palantir full-year 2024 revenue guidance which came in above the estimates amid strong growth in the commercial market. This is something that Bulls held on.

Yesterday (06 Mar 2024), we saw another 10% upside from latest contract with the U.S. army won, Palantir is a volatile stock, and the latest S&P 500 snub did not help them. Yet despite share-price volatility, the business growth trajectory continues to accelerate (from government and commercial customers), and the company's extraordinary AIP Platform is leading in a long-term market-wide megatrend.

Organizations often experiment with single-purpose tools and custom software solutions for specific workflows such as customer relationship management and financial planning. Each new tool or application creates a new silo within a fragmented data landscape. As organizations grow and change, their legacy technology often fails to keep up, and fixing a Legacy System Can Be as Expensive as Building One from Scratch. A typical response to aging infrastructure is a custom solution, bought or built in-house to meet bespoke requirements.

Palantir Approach To Organization Legacy System

Palantir understood these challenges and came up with an approach of not selling features, tools, or one-off custom applications, allowing organizations to recast their siloed systems as contributors to a unified data asset.

Palantir has three principal software platforms: Gotham, Foundry, and Apollo. These software platforms provide the critical infrastructure to integrate customers’ data and operations and run their software in virtually any environment. 

The vertically integrated nature of Gotham and Foundry allows users of varying technical abilities to collaborate. Data engineers can integrate new data sources, analysts can clean and transform data, data scientists can write models, business users can conduct daily workflows, and senior leaders can make critical decisions. 

Palantir Business Model and Phases

Palantir is a software company offering intelligence services from governments and institutions to large commercial organizations. The company’s two main platforms Gotham and Foundry, are integrated at enterprise-level. Its business model follows three phases: Acquire, Expand, and Scale. The company bears the pilot costs in the acquire and expand phases, and it runs at a loss. Where in the scale phase, the customers’ contribution margins become positive.

Value Proposition

Palantir offers a range of value propositions for its customers:

Data Integration: The platform provides tools to integrate and analyze data from various sources, offering a comprehensive view for informed decision-making.

Advanced Analytics: Palantir offers powerful analytics and data visualization capabilities for insights and predictions.

Security and Privacy: The platform emphasizes robust security and data protection features, crucial for sensitive industries and government agencies.

Customization: Palantir’s software can be tailored to address specific needs and use cases, ensuring flexibility.

Efficiency: The platform streamlines data workflows, reducing manual tasks and accelerating data-driven decisions.

Industry Expertise: Palantir serves various industries, offering industry-specific solutions and expertise.

Core Products/Services

Palantir’s core products and services include:

Foundry: Palantir Foundry is a data integration and analytics platform that enables organizations to manage, analyze, and visualize their data effectively.

Gotham: Palantir Gotham is designed for government and defense agencies, providing intelligence and data analysis capabilities for national security.

Apollo: Apollo is Palantir’s platform for developers, offering tools to build custom applications and solutions on top of Palantir’s software.

Consulting and Support: Palantir provides consulting, training, and customer support services to assist clients in implementing and optimizing their use of the platform.

Industry Solutions: The company offers industry-specific solutions, such as Palantir for Healthcare or Palantir for Financial Services.

Data Integration: Palantir helps organizations integrate data from various sources, both structured and unstructured.

Customer Segments

Palantir’s customer segments include:

Government Agencies: Federal, state, and local government agencies use Palantir’s platforms for intelligence, law enforcement, and disaster response purposes.

Financial Institutions: Banks and financial services firms leverage Palantir’s solutions for risk management, fraud detection, and regulatory compliance.

Healthcare Organizations: Hospitals and healthcare providers use Palantir’s healthcare-specific platform for data analysis and patient care improvement.

Energy Companies: Energy companies rely on Palantir for optimizing operations, managing resources, and ensuring cybersecurity.

Manufacturers: Manufacturers use Palantir for supply chain management, quality control, and process optimization. – Aerospace and Defense: Aerospace and defense companies utilize Palantir Gotham for national security and intelligence purposes.

Revenue Streams

Palantir generates revenue through several revenue streams:

Software Licensing: The company earns revenue by licensing its software platforms, such as Foundry and Gotham, to clients on a subscription or usage-based model.

Consulting Services: Palantir provides consulting and implementation services, charging fees for assisting clients in setting up and optimizing their use of the platform.

Support and Maintenance: The company offers customer support and maintenance contracts, generating recurring revenue.

Customization and Development: Palantir may charge for custom development and integration work to tailor the platform to specific client needs.

Data Integration Solutions: Revenue can be generated by offering data integration and data transformation services.

Industry-Specific Solutions: Palantir may charge fees for industry-specific solutions and expertise tailored to specific sectors.

Distribution Strategy

Palantir’s distribution strategy focuses on security, government, enterprise, and industry-specific solutions:

Government Contracts: The company secures government contracts and partnerships to serve government agencies and national security organizations.

Enterprise Sales: Palantir targets enterprise clients across various industries, offering its data integration and analytics solutions.

Security and Compliance: Palantir emphasizes security and compliance features to cater to clients with stringent data protection requirements.

Customization: The platform is highly customizable, allowing for tailored solutions to meet the unique needs of clients.

Industry Focus: Palantir develops industry-specific solutions and tailors its marketing and sales efforts to target key sectors.

Developer Ecosystem: Palantir fosters a developer ecosystem through its Apollo platform, encouraging third-party developers to build on its software.

Summary

So rather than we depend on per piece news and development, maybe it is high time we consider and understand what are Palantir competitive advantage? what makes a good company?

I personally feel that Palantir have a very good verticals and parallels set up, this is the best time these verticals would benefit from the AI evolution, as the evolution is maturing. We might see some incumbents into the market, do think of it as supporting the ecosystem, which I believe Palantir has a pretty strong one, and will grow it with help of the community.

Coming to the stock price move, we can see that there was a long period of consolidation, and Palantir try to break out, but failed. But we are seeing a new upside trend forming.

This might be a good time to plan for an entry, though price is high, look towards $29 and beyond.

Appreciate if you could share your thoughts in the comment section whether you think Palantir can break out to $29 and beyond.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.