Good Monday everyone and welcome to the BCB Cyber Series that takes on the Tech stocks that can provide the cyber-fuel we need to pursue our digital wealth passions.
This week we revisit one of the most exciting digital analytics companies that have recently jumped into the public markets: Palantir. Remember, whenever we do a revisit, our new material is posted on top of the previous in red so we can pick out the newest with ease all the while keeping the newbies up to date on a full, developing analysis. Now on with the show and the company with a name built on the seeing stones of Lord of the Rings, Palantir.
We began our analysis of Palantir back on December 7th, 2020, and today we are back on track in the month of March with Tech-Growth Companies looking again at Palantir. As always, we are digging for the cyber fuel we need. For all these growth stocks we are looking for top-line revenue growth of 20% or more!
Growth of Palantir
From the December 7ths report (at left; top on a cell phone) to March 15 (at right; bottom on a cell phone), we can see the dramatic boost in PLTR Revenue. Charts from Yahoo! Finance blended with a little cyber-fuel.
Palantir’s continuing growth trajectory certainly qualifies it as a perfect growth stock prime for analysis. Before we dive too deep though, as always BCB Cyber loves the deep dive, we strongly advocate that you don’t act solely on anyone’s opinion, even ours! Make sure we are all thinking for ourselves as self-definers and making our own decisions. In the end, the responsibility is on each one of us as individuals. So decide wisely!
Jumping right in now, we do these quick deep dives so we can all get the info we need but also do so in a way that keeps us going in our day. To do this the BCB Cyber way we cover 3 quick pieces of important information. First, we tackle the story to find out who and what the company is, second, we look at the numbers both positive and negative, and finally we discuss our own BCB Cyber position.
This is TS2B, Tech Stock to Buy, hi-tech growth edition, and this week we are going to take on Palantir, the Denver, Colorado Software Infrastructure company forging new paths ahead when it comes to data integration all the while fulfilling a promise to keep America safe.
We’re gonna be honest, Palantir for us is still all about the story right now. We do love that revenue growth though. So, let’s wade in and keep a watchful eye.
Palantir has incredible promise and a first foot in the door with industry giants defense, aerospace, and health care. Where they go from here will definitely be a story worth following. And so far, the story is just getting better.
1 – STORY
Palantir presents us with an incredible story capable of redefining so much in the world of analytics and data. This company, while oft secretive, presents a unique opportunity in driving how data becomes the core tool and structure redefining our world.
One of the most unique aspects of Palantir is how it represents a new OS for the modern enterprise with the capability to bridge and drive industry in a number of ways.
This comes with a fantastic growth opportunity as we have seen not only a current increase of 52% year over year for revenue but also the overall projections have gone up for the year.
Most well known for its ties to the U.S. government and its promise to help keep America safe, this company continues to grow and develop these opportunities in a variety of capacities.
However, the story that provides its greatest opportunity lies in its ability to reach out across the industry and redefine what it means to do business. Palantir, with the standing global health crisis ongoing, has sought a massive impact on public health regarding the security of scientific platforms.
Palantir is joining the biggest names in data like Google, Microsoft, and Facebook when it comes to taking on global health challenges.
In the first few months of 2021, the pace of this has only accelerated as a newly announced partnership IBM joining deepening ties to others like British Petroleum (BP) and 3M under the new technologies offered in Palantir’s Industry-based Foundry product line. Ultimately, Palantir is helping to push new technologies that do everything from reducing a companies carbon footprint, to assist with vaccine delivery, to boosting AI data processing and fueling dynamic supply chains! The sky is definitely the limit here.
Above are several articles sourced from Palantir’s Media site that demonstrate the accelerated integration of Palantir products into a host of the world’s most challenging problems.
In terms of the disruptive nature of their technological prowess, the numbers speak for themselves. Speed, efficiency, and impact. In one case study highlighted by Palantir, within two weeks they assisted one company in saving $57 million in the case and provided the opportunity for an additional $1billion savings on an annualized basis.
For others, Palantir simply changes the way they do business!
One of the best pieces of news about the story on Palantir though is the most recent announcement that Palantir was putting its money to work on investment in their future as opposed to sharing earnings now. They made the claim that short-term investors may want to look elsewhere, but this is right up our alley as we are long-term. We love a big, disruptive tech story that drives its own ability to help dominate future opportunities. Ark Invest’s Cathie Wood put this rather eloquently on CNBC’s Halftime Report back in February.
Thanks to Disruptive Innovations for their capture of Cathie Wood’s thoughts on Palantir
2 – BY THE NUMBERS
Now for the updated numbers on Palantir. BCB Cyber loves to follow five specific metrics: Sales/Revenue Growth, Forward Price to Earnings Ratio, Return on Assets, Operating Margin, and Debt Considerations.
Again, we see above the expanded revenue growth of Palantir which 2019 to 2020 demonstrated nearly 32% growth year over year in sales/revenue. This is spectacular and exactly what we hope to continue to see. While revenue is definitely above our 20% growth mark, there are concerning signs that we continue to follow.
As the Forward P/E becomes established, we are at first taken aback as to the full metric. Still sitting around 200, Palantir is very expensive at first glance. However, as sales have continued to climb at an accelerated pace we see that since December the P/S ratio has declined coming more in line with September 2020; albeit still noticeably higher. The stock is not as extended as it was representing a bit more value than before. A buying opportunity???
While Palantir is not yet profitable, again we are excited to know that management (from the story above) is asking investors to continue to expect this as they reinvest earnings toward building the company and their role in the addressable marketplace (meaning they want to be a bigger player). The growth in sales helps to know that expanded costs have something to build on as well and that the only source of expansion is not just debt.
This is why we must be diligent and continue our homework on this amazing tech company. Next is the balance sheet so that we can see how the companies expansion is doing as a matter of course. In other words, is does the company still possess enough cash in the mrq (most recent quarter) to cover its concurrent debts.
While Palantir, does represent some risk, it has created for itself a solid base to stand on. Its cash position has been bolstered in 2020 and 2021 to a level that debts seem very manageable and still possess room for growth. And grow is exactly what Palantir is doing.
Only time will tell regarding the development of Palantir’s cash position, but as revenues continue to grow at these high levels, it is quite possible for Palantir to develop its growth trajectories and build a solid cash footing to stand on; particularly in reference to its debts.
3 – THE BCB CYBER TAKE
Where the analysts of places like Simply Wall Street have updated their current assessment to an “adequate” balance sheet from an “excellent” one, much of which we explored above, their current growth trajectories certainly seem to be under-representing the case.
Growth at over 30% in revenue is also expected for this and next year, and we at BCB Cyber don’t see how this is limited as the story expands in both governmental and industrial applications. Palantir is proving to be a formidable entity that is well-positioned to gain a strong foothold in the analytics industry across sectors and purposes.
As of this morning, on 3/15/21, our stake in Palantir has risen to 3.49% of our portfolio with a cost basis of $23.05. As the stock has gone from an IPO at around $10 and has tracked as high as $45 at its 52-week high, we’ve seen a lot of volatility in this company’s shares and many opportunities for “buying the dips.” However, we are careful as we invest for the long term opportunity, our target is anything under $25. Pre-market on 3/15/21 we sit at a price of $27.27 (6:40AM MDT), a bit too expensive for our tastes. However, while we have increased our price target, we continue to do so with an eye to price as we pursue a 5% portion in our portfolio.
Remember, we are just like the masses, struggling to make ends meet and build our future. So, we start building and keep doing our homework. Adjusting and flexing over time, if we see a massive spike we may lighten our position some, but always with an eye to keep our portfolio percentage at 5% in Palantir. The same goes in reverse, so if tech takes a nose dive, you can bet we’ll be watching and looking to add. This is just what we need to start us on our journey toward cyberizing our lives.
BCB Cyber believes in the potential for this risky, tech innovator and loves the story. However, this is definitely a stock worth buying at the right price and one that BCB Cyber believes to be the right fuel for the fire! Remember we balance our perspective and cyberize our wealth over a longer term of 5 years or more. We will definitely be looking to add to our position, with the right portfolio proportions of 5 percent and at the right price.
Remember, as always, think for yourself, do your own homework, and cyberize your life with the best in disruptive tech. Learn more in our Wealth Section and dive deeper into Establishing the Baseline on BCB Cyber.com!