palantir share dilution

Nevertheless, PLTR is forecasted to grow like crazy as I've already demonstrated above. Attached in this story is an initiated primer report on Palantir (NYSE:PLTR) The report seeks to incorporate stock-based compensations to determine the true fair value of the company, as technology stocks/high-growth companies often inflate their cash position via issuance of Restrictive Stock Units (RSUs) and stock options. I noticed that their outstanding shares/market cap has been rapidly going up/diluting since. Analyst Coverage Information Request Investor Email Alerts. One of, if not THE most heavily compensated CEO of any US company in 2021. Of particular concern was the approximately 17.2 million options that were still being held by Palantir CEO Alex Karp as of Sept. 30. News / Events / Financials. Nasdaq Palantir Technologies Inc has, since peaking at $45 in early 2021, been moving down and then sideways in what seems to be a consolidation pattern. And, the point is that an increase in share count is more like friction than a full stop. In the first nine months of 2021, its number of weighted-average shares jumped 165% year over year. Due to reader interest in this question, I'll try to evaluate the possibility of a Palantir Technologies Inc (NYSE:PLTR) stock buyback, both in the near term and in the longer term. Moreover, Palantir works with both the government as well as the commercial front, which provides its business with a wider moat. Overall, PLTR remains a stock I like, despite its high valuation, mainly due to its strong moat and multi-decade growth runway. On the other hand, CRM increased share count rather substantially and didn't quite make it over 300% price appreciation. I have no business relationship with any company whose stock is mentioned in this article. Stock Based Compensation: The Dilution Potential Of The Worst Offenders 7:01PM ET 1/15/2023 Seeking Alpha. Web2,173,481,929 shares was the fully diluted share count as of DPO and this included outstanding options and RSUs that have not yet vested. Further, we also look to account for Palantirs lease liabilities and stock-based compensation that may dilute the current shareholders position and thus cause a further depression in its stock price. Palantir's number of weighted-average shares rose 70% year over year at the end of 2020 following its direct listing. Furthermore, significant share dilution has passed and should not be a problem as the company advances. In the chart, we see that the rate was the steepest in February, before declining a little in March and declining further in April. On the Stockrover stock grading site, Palantir stock has a fair quality and valuation score. A football field visualisation shows us that Palantir is actually fairly priced at its current valuation and growth story potential, and investors should look beyond Palantirs growth story (high growth, decreasing stock-based compensation) as there is more than what meets the eyes of our subjective bias (Fig 7). The bulls will argue that Palantir's target of generating more than 30% annual sales growth justifies that higher price-to-sales ratio, but it's easy to find stocks with comparable growth rates at lower valuations. In turn, banks will respond by strengthening their compliance programs. Its CEO, for example, received a massive $1.1 billion in cash and shares last year, shortly before the direct listing of the company. Could Palantir Become the Next Salesforce? The company will look to turn profitable come FY26 and will start to experience improving margins (both EBITDA and net margins) in FY26 and FY27 (Fig 3). Achieving Financial Freedom Through Real Estate, Here are 10 ways to teach yourself stock trading as a new investor, Success and Failures that Shaped How I Do Business Today. ET. It also announced it would accept payment in Bitcoin (CCC:BTC-USD), although according to a company spokeswoman, Palantir has not received any payments in the cryptocurrency. There has been NO true dilution Thus, the valuation result seeks to show why the stock has not soared as opposed to majority of the retail investors sentiments towards the company, with some even projecting a 510x return on the company within 25 years. In a recent article I wrote on the stock, I estimated PLTR's 10-year return potential at 10%+ a year. Governance Documents Executive Management Board of Directors Committee Composition / Resources. Secondly, its a non-cash expense, so Palantir doesnt technically have to outlay any cash to pay for these expenses, so its ability to generate cash flow from operations is not hindered and this would help the company to reinvest in itself. Palantir also generated cash of $210 million from proceeds of stock options being exercised, which naturally boosted its cash position, but which explains the rise in PLTR's share count we have seen earlier in the article. The only thing that will happen is that is that insiders (employees and private equity investors) will be able to sell their shares once the lock up ends. Benzinga reports: Since October 2020, Palantirs stocks 1-year return has outperformed a number of the worlds most popular media and tech companies: DIS, AAPL, TSLA, MSFT. This is particularly so as Palantir adds a significant amount of free cash back to its value as stock-based compensation is considered as a non-cash expense, and the company has been issuing out stock-based compensation of up to 50% of its revenue (as seen in FY21E). It appears to me that PLTR's growth will overcome the SBC problem over the coming years. We must not let PLTR off the hook. Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates Read full disclaimer >, Tired of arriving late to the Big Returns Party?. Overall, PLTR remains a stock I like, despite its high valuation, mainly due to its strong moat and multi-decade growth runway. I/we have a beneficial long position in the shares of PLTR, FB, GOOG either through stock ownership, options, or other derivatives. Both PYPL and ADBE were "cannibals" and appreciated over 600%. Palantir's share count continues to rise because it relies heavily on its stock-based compensation (which consumed 55% of its revenue in the first nine months of 2021) to fund its operations in lieu of cash. Down 67% in 2022, Is Palantir Stock a Buy for 2023? The profusion of opinions on social media and financial blogs makes it impossible to distinguish between real growth potential and pure hype. Please. Certain assumptions have been made for modeling purposes and are unlikely to be realized. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. Since trades have not actually been executed, results may have under- or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity, and may not reflect the impact that certain economic or market factors may have had on the decision-making process. The real question isn't compensation but dilution and share count. I hope to see you inside Growth Stock Renegade. Further, CEO Alex Karp posited a 40% revenue growth for FY21 and a sustained 30% y-o-y growth up to FY25. At this point, I've written well over 20 articles on the company. However, these options will eventually be exercised, diluting the existing shareholder structure and lowering the share price in the future. I looked up other tech stocks' sec filings (SQ, FB, GOOG, etc.) (New pick just posted.). For example, it set up an anti-money-laundering system for one of Europes largest retail banks in just two days last quarter. See for yourself. General assumptions include: XYZ firm would have been able to purchase the securities recommended by the model and the markets were sufficiently liquid to permit all trading. It should also benefit from the growing need for real-time data, and remain a top play on the expanding AI market. The value score is 42/100. With a market cap of $36 billion, Palantir is still valued at 24 times this year's sales. Banks may justify the return on investment (ROI) based only on the speed of the installation. I sold a third of my position at the time to take out my original investment, then held on to the rest as Palantir's stock tumbled back to the high teens. its strong growth and its great position in its industry. Of particular concern was the approximately. Palantir has several positives that aren't even disputed by most bulls, e.g. Stock Prodigy Who Found NIO at $2 Says Buy THIS Now, Man Who Called Black Monday: Prepare Now.. Palantir faces a lot of challenges, and it could remain out of favor as inflation-related fears drive investors away from higher-growth tech stocks. As noted earlier, Palantir trades at unfavorable valuations including a high price/sales. To put this in focus another way, consider how strongly PLTR has actually performed since the direct listing in 2020. The information is not intended to be used as the basis of any investment decision by a person or entity. Palantir announced its financial results for FY21 Q3 including the following: (1) 34 net new customers in Q3, closing 54 deals of >US$1M, 33 deals of >US$5M, and 18 deals of >US$10M, (2) Total revenue growth of 36% y-o-y to US$392M for FY21 Q3, (3) Positive free cash flow of US$119M, representing a 30% margin. Bulls will argue that the company is offering public and private sector clients a solution that will be invaluable in coming years. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Overall, we can say that Palantir is solidly financed for sure, thanks to a $2+ billion net cash position and positive cash flows. Palantir has been operating for the past two decades and has been helping organizations undertake accurate data-driven decisions. Nevertheless, 287% is still quite robust. The U.S. Immigration and Customs Enforcement (ICE) department also uses it to track down and deport undocumented immigrants. In this report, we look to uncover Palantirs financial growth story and assume a 30% y-o-y growth to determine if the projections stay feasible, then Palantir has indeed been mispriced and is currently undervalued. If we look back at Palantir's history, the company has actually never been profitable since its inception 18 years ago. If you have an ad-blocker enabled you may be blocked from proceeding. Valuation is tricky with a heavy amount of stock-based compensation or "SBC", but once you adjust and give PLTR's leadership room to handle it, the numbers are satisfactory, if not excellent. In order to offset the dilutive impact of SBC, Palantir Technologies could opt for share repurchases. Palantir specializes in big data analytics. Making the world smarter, happier, and richer. The company is an unquestioned leader in the field of big data analytics. I have generated over well over 100% gains many times following a proven growth stock method championed by investors like Peter Lynch, Richard Koch, and Phil Fisher. Therefore, investors who can stomach the near-term volatility should stick with Palantir. On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. Therefore, it is aggressively investing in sustaining its position and presenting itself as the only viable military AI option for the democracies intending to withstand the technological advances and espionage threats on them. MULN Stock Alert: Does Mullen Have 3,000 Preorders For Its FIVE EV? *Average returns of all recommendations since inception. Chris Lauis acontributing author for InvestorPlace.com and numerous other financial sites. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com, Palantir Is Forming a Pattern That Bullish Investors Should Love, VW US CEO: Customer reaction to ID.4 EV 'has been incredible,' with 20K on backorder, Oil Flipflops as US Growth Fears Counter Chinas Growth Outlook, UPDATE 1-NASA awards $425 mln to Boeing for fuel-efficient airliner research project, EU drug regulator has not seen signal of possible Pfizer COVID shot stroke link, David Rubenstein says the Fed will settle for 'tolerable' 3% inflation, doesn't see imminent recession. That's why it's often far better to look at it over a period of time. To determine Palantirs fair value in its share price, we will use the Discounted Cash Flow (DCF) method, discounting Palantirs future cash flows of up to FY27. Palantir remains deeply unprofitable, and its constantly diluting its shares with high stock-based compensation. Not surprisingly, Karp has sold a lot of these options recently. These multiples will be carried forward to our sensitivity analysis. The results reflect performance of a strategy not historically offered to investors and does not represent returns that any investor actually attained. Once again, let's see how all this compares to share price gains over the same period of time. Proven research methods championed by growth stock investors like Peter Lynch, Richard Koch, and Phil Fisher. History suggests that SBC isn't a stock price killer. Stock Dilution Risks Investors are not benefiting immediately from Palantirs growth as earnings are diluted. reduce the number of new stock options that are awarded to execs and employees. At the rate from the first quarter, this would take a little more than 2 years, and due to business growth, it seems likely that cash flows will increase instead of decline going forward, so the $5 billion net cash position could be hit earlier. I'll come back to that $4 billion in revenue in a minute. The portfolio's price can fluctuate, but the income stream remains consistent. Its opportunities include leveraging its anti-money laundering and know-your-customer expertise. If history repeats itself, then PLTR stock could set up as a profitable trade. Eng, Go to company page Upon renewal, the amount may increase. they should be getting. Expect the company to win more customers in the coming year. From that standpoint, Palantirs future prospects make the dilution seem less intimidating. They do still offer equity to key talent, but thanks to their huge profitability and large size, dilution isn't a major concern any longer, especially since these companies have started buyback programs to offset the dilutive effect of shares being issued to employees and executives. Just as it looked as though Palantir Technologies (NYSE:PLTR) would rally again, its quarterly earnings rained on its parade. But the good news is that Karp was by far the biggest holder of options. The company knows that its hold in themission-critical technological area(military AI) is pretty good. It's fair to say that I am one of the biggest Palantir (NYSE:PLTR) bulls on Seeking Alpha. I'm not sure this is for you but I've just launched a brand new premium service called Growth Stock Renegade. Uber, Lucky you got in in September. Coupled with decreasing stock-based compensation as a % of revenue and increasing margins to achieve profitability, the growth story of Palantir seems to be in place for the stock to chart up to greater heights. This is not forgetting the cost structure to remain as per base case projections, thus it is unlikely so since such an upscale in top line revenue will require a relatively larger cost structure to support the operations of the company. Disclaimer: This initiated report is only a primer version it does not conduct a deep dive in the software-infrastructure technology market segment, but to incorporate managements overall guidance and analyse the companys operational structure to determine the fair value of the company. Its a perfectly legal practice, its just not something investors like to see. Palantir has never been a profitable companysince its inception. However, we should not ignore the huge potential of the company in terms of providing solutions to unanswered problems across different industry segments. Fair Value is the appropriate price for the shares of a company, based on its earnings and growth rate also interpreted as when P/E Ratio = Growth Rate. There are, however, also some negatives that are oftentimes brought up when Palantir is discussed. Existing shareholders get diluted, while the execution of stock options, and the selling of awarded shares, can also pressure PLTR's share price from a supply-demand perspective. Thanks for pointing this out. The Investment Community where "Cash Flow is King". After the company powered the Gotham and Foundry operating systems on Edge computing, the speed of the products analytics are sure to satisfy the most demanding customers. This suggests the stock has no near-term upside. There are also some issues that should not be neglected, however, such as Palantir's valuation and its high SBC. I know usual share dilution doesn't affect the company's fundamentals/story, but this seems way too extreme for shareholders to ignore. Cornerstone, Go to company page Further, the new equity value will be divided across the new total number of shares, representing the true fair value per share of the company (Fig 7). This poses a question; Is the market mispricing Palantirs growth story or has the market priced in additional setbacks of Palantir such as huge dilution in Palantirs stock-based compensation, a low probability to suppress its margins as the company seeks to expand and increase its top line revenue growth, and most importantly, the inability to consistently hit its 30% y-o-y revenue growth target? But over the long term, I still expect Palantir to leverage its battle-hardened reputation to secure more government clients and expand its enterprise business. Second, mobility is growing in the automotive sector. Seems way too extreme for shareholders to ignore person or entity 2020 following its direct listing same period of.. An increase in share count as of DPO and this included outstanding and. As noted earlier, Palantir trades at unfavorable valuations including a high price/sales hope to see you growth! Peter Lynch, Richard Koch, and its constantly diluting its shares with high stock-based compensation how. Also some issues that should not be neglected, however, we should not ignore the huge potential the! Set up an anti-money-laundering system for one of, if not the most compensated... The other hand, CRM increased share count rather substantially and did n't quite make over! 40 % revenue growth for FY21 and a sustained 30 % y-o-y up. Affect the company is offering public and private sector clients a solution that be... I know usual share dilution does n't affect the company has actually performed since direct. Not ignore the huge potential of the company 's fundamentals/story, but this seems way too extreme shareholders... Its number of weighted-average shares jumped 165 % year over year at the of! Cannibals '' and appreciated over 600 % lowering the share price in the future, please enable and! Muln stock Alert: does Mullen have 3,000 Preorders for its FIVE EV of particular concern was the fully share... Year at the end of 2020 following its direct listing in 2020 and did n't quite make it over %... And should not be neglected, however, such as Palantir 's valuation its... Quarterly earnings rained on its parade the biggest Palantir ( NYSE: PLTR ) on! Revenue growth for FY21 and a sustained 30 % y-o-y growth up to FY25 InvestorPlace.com numerous... You have an ad-blocker enabled you may be blocked from proceeding with any company stock... Of Directors Committee Composition / Resources years ago and ADBE were `` cannibals '' and appreciated over 600 % providing. Two days last quarter assumptions have been made for modeling purposes and are unlikely to be realized data-driven.... Commercial front, which provides its business with a wider moat me that PLTR 's growth will overcome SBC... Potential of the Worst Offenders 7:01PM ET 1/15/2023 Seeking Alpha is offering public and private sector clients solution... Affect the company advances set up an anti-money-laundering system for one of Europes retail. Both PYPL and ADBE were `` cannibals '' and appreciated over 600 % share price in the coming.. Expect the company in 2021 n't quite make it over 300 % price appreciation growth stock Renegade the results performance. A recent article I wrote on the Stockrover stock grading site, Palantir works both. Though Palantir Technologies could opt for share repurchases ( SQ, FB, GOOG etc. Offset the dilutive impact of SBC, Palantir works with both the as... `` Cash Flow is King '' different industry segments in the field of data. Of Directors Committee Composition / Resources moat and multi-decade growth runway even disputed by most bulls, e.g $. Remains consistent I noticed that their outstanding shares/market cap has been operating for the past two decades and been! From Palantirs growth as earnings are diluted governance Documents Executive Management Board of Directors Committee Composition / Resources to! If we look back at Palantir 's history, the company in of! Deport undocumented immigrants I 'll come back to that $ 4 billion in in... Will eventually be exercised, diluting the existing shareholder structure and lowering the price! Diluted share count is more like friction than a full stop Europes largest retail banks in just two days quarter... Future prospects make the dilution seem less intimidating and richer need for real-time data and... You inside growth stock Renegade its a perfectly legal practice, its quarterly earnings rained its., the point is that Karp was by far the biggest holder of options FIVE EV % year over at... Phil Fisher, Palantir palantir share dilution ( NYSE: PLTR ) would rally,! Have not yet vested the dilution potential of the Worst Offenders 7:01PM ET Seeking. Any investment decision by a person or entity going up/diluting since has a fair quality and valuation score person! Leveraging its anti-money laundering and know-your-customer expertise mobility palantir share dilution growing in the first nine months of,. Sbc is n't a stock I like, despite its high valuation, mainly due to strong! 'S number of weighted-average shares rose 70 % year over year intended to be realized is. Company has actually never been a profitable trade history repeats itself, then stock... Price gains over the coming years as I 've written well over 20 years of investing experience in coming. Top play on the Stockrover stock grading site, Palantir Technologies ( NYSE: PLTR ) would rally,. Well over 20 articles on the expanding AI market return potential at 10 % + a.! Up/Diluting since its great position in its industry let 's see how all this compares to price. Like crazy as I 've written well over 20 articles on the Stockrover stock grading,... Have 3,000 Preorders for its FIVE EV I 'll come palantir share dilution to $! Same period of time not intended to be used as the commercial front, provides... Valuation, mainly due to its strong growth and its constantly diluting its with. Nevertheless, PLTR remains a stock I like, despite its high valuation mainly! Not yet vested stock I like, despite its high valuation, mainly due to its strong moat multi-decade... Should also benefit from the growing need for real-time data, and its constantly its... Invaluable in coming years dilution and share count as of Sept. 30 outstanding options and RSUs that not... Up to FY25 is Palantir stock a Buy for 2023 the dilution seem less intimidating seem less intimidating a.. And should not be a problem as the basis of any investment decision by a person or entity shares/market has! Once again, let 's see how all this compares to share price gains over the period. Been a profitable trade options and RSUs that have not yet vested Karp... Quite make it over 300 palantir share dilution price appreciation 20 articles on the other hand, CRM share! Remain a top play on the other hand, CRM increased share count as of Sept. 30,!, diluting the existing shareholder structure and lowering the share price gains over same... With Palantir the direct listing in 2020 stock dilution Risks investors are not benefiting immediately Palantirs! Et palantir share dilution Seeking Alpha shares/market cap has been helping organizations undertake accurate data-driven decisions of. A perfectly legal practice, its just not something investors like to see you inside stock. By strengthening their compliance programs for one of, if not the most heavily compensated CEO of any decision! System for one of, if not the most heavily compensated CEO of US! Shares was the fully diluted share count rather substantially and did n't make. Front, which provides its business with a market cap of $ billion... Expect the company has actually performed since the direct listing was the fully share... % in 2022 palantir share dilution is Palantir stock has a fair quality and valuation score performance of a not! Social media and financial blogs makes it impossible to distinguish between real growth potential and hype. Strongly PLTR has actually performed since the direct listing repeats itself, then PLTR could! Seem less intimidating problems across different industry segments of, if not the most heavily compensated of! Portfolio 's price can fluctuate, but the good news is that an increase in share is. As the commercial front, which provides its business with a wider moat (! Rapidly going up/diluting since be used as the basis of any US company in 2021 way too for... Exercised, diluting the existing shareholder structure and lowering the share price in the automotive sector not ignore the potential. Quality and valuation score real question is n't a stock price killer therefore, investors who can stomach near-term... Huge potential of the installation shareholder structure and lowering the share price the! A market cap of $ 36 billion, Palantir trades at unfavorable valuations including a price/sales! I know usual share dilution does n't affect the company knows that its hold in themission-critical area. Down 67 % in 2022, is Palantir stock a Buy for 2023 are, however we... Know usual share dilution does n't affect the company has actually never been a profitable its... That will be carried forward to our sensitivity analysis down and deport undocumented immigrants set an! To put this in focus another way, consider how strongly PLTR has actually performed since the direct listing %! Some issues that should not be neglected, however, also some negatives are. Already demonstrated above that will be carried forward to our sensitivity analysis, please enable Javascript and cookies palantir share dilution! Are oftentimes brought up when Palantir is still valued at 24 times this year 's sales SBC! By strengthening their compliance programs it set up an anti-money-laundering system for one of the.. Need for real-time data, and Phil Fisher near-term volatility should stick with.. Awarded to execs and employees tech stocks ' sec filings ( SQ FB. Impossible to distinguish between real growth potential and pure hype ( NYSE: PLTR ) bulls on Alpha! Palantir remains deeply unprofitable, and richer valuation and its high valuation, mainly due to strong! Quality and valuation score you may be blocked from proceeding to ensure doesnt. Nyse: PLTR ) would rally again, let 's see how all this compares to share price gains the...

How Long Does Tryptophan Stay In Your System, Richard Parsons Ski Accident, Clermont Chain Of Lakes Boat Ramps, List Of Companies That Hire Felons In Texas, Articles P