“Palantir Technologies Inc. reported a loss for the fourth quarter, and the data-mining company signaled Tuesday that sales could grow at a slower pace,” WSJ writes.
Why It Matters: The defense software technology, which was co-founded by Peter Thiel, has been shrouded in secret for years. That was until it hit the public market via a direct listing in September. These numbers could be cause for alarm, but Palantir continues to assert that it isn’t “focused on the day-to-day, quarter-to-quarter, near-term focus that, quite frankly, destroys businesses. It’s one of the main reasons why so many of our businesses, especially in tech, are actually only serving Wall Street and not serving their clients,” according to CEO Alex Carp.
- Shares of Palantir fell 13% to $27.84 following the update.
Numbers To Consider:
- Revenue: $322.1 Million (+40%)
- Quarterly Loss: $148.3 Million
- Total Full-Time Employees: 2,500
Palantir executives expect revenue growth of more than 30% annually over the next five years. Sales improved by 47% from 2019 to 2020.
- As a whole in 2020, the company lost $1.17 billion on $1.1 billion revenue.
- Palantir shares hit the public market at $10 and climbed as high as $39.
Looking Ahead: The company has said it plans to make a significant investment in its sales team this year and landed deals in Q4 with corporate clients such as Rio Tinto and BP. IT also plans to push its relationship with the federal government forward, “noting recent agreements with the U.S. Army.”
Palantir ($PLTR) has been a buzzy stock ever since IPO, but we went with a higher-conviction B2B stock in Asana ($ASAN) instead because it was more attractive from a valuation perspective.
Palantir actually reported a great quarter, beating Wall Street expectations on both Revenue and EBITDA (profit). The company grew revenues by 40% in Q4 and 47% for the full year of 2020. Furthermore, Palantir proved out positive run-rate Adjusted Operating Margins of 17%.
What I think has happened here is that the retail investor community, especially the Wall Street Bets and YouTube ones, has been hyping $PLTR since November. Its buzziness has driven its stock price up to valuations where the expectations are so high that even guidance for 30%+ growth and 4x revenue by 2025 is “disappointing”.
At $28 per share, Palantir is valued at $45 billion, which is about 39x forward Gross Profit. If Palantir grows at a constant 35% CAGR for the next 5 years, I believe the stock is either fairly valued or arguably overvalued. In any case, maybe $PLTR delivers great returns based on how unique and attractive this asset is, but it definitely is not a screaming buy based on valuation.