What does it do? Many investors in PLTR have no idea what the company actually does to make money. Putting it as simply as I can the company creates software for companies to analyse data and create simulations which help companies or governments make decisions which will help them strategies. For example they take all the data regarding COVID infections and help governments predict how it might spread which will allow them to distribute vaccines to the areas that will reduce the spread of the virus the most.
Financials The company should be profitable either in 2021 or 2022. In 2020 the company had a one off cost of almost $1 billion for stock based compensation for its employees. The companies revenues are increasing 30% year over year and the losses are decreasing every year. When it does become profitable the profits will increase rapidly. As CEO Alex Karp has explained their has been a wide divergence between the Revenues and costs which is typical with tech companies that need to spend a large amount of money in the beginning for product development and make large profit margins once they have a working product. The revenues are currently at just over a $1 billion dollars with a loss of $1.17 billion in 2020 however when you look at the reason for this it’s mainly because selling and admin costs aswell as research and development. Now what needs to be understood about the financials of Palantir is that although there is a divergence in revenues and costs there is not and with the product and systems they currently have there will not be in the future a scenario where there cost of revenues are flat and the revenues increase. This is because the software has to be adapted to each of its customers which requires time and money. That being said the company currently has a gross profit margin of 75% and considering the average customer pays $7 million this is not concerning at all.
Technology or Consulting Firm As explained above the company does need to personalise its software based on the customers needs and the cost of revenues are not flat however I don’t think you can reasonably argue this is a consulting firm. The company may need to personalise its software for each customer for its commercial clients but this is just an set up fee and from then on the company is making large profit margins. With its government clients I’m assuming their is very little personalisation to the software that is needed and they can simply input the same variable data that previous government agencies have inputted and run there simulations if they are looking for the answer to the same question for example what areas should we distribute the COVID vaccine to first?
The End Game! Palantir is a long play for me. In the short term this company could go up to 40 or back down to 15. Any lower and I’m selling my house to buy as much as I can. But as Alex Karp said over the long term he thinks Palantir will be one of the most important technology companies in the world and its long term share holders will benefit greatly. This reminded so much of Jeff Bezos back in 1999 talking about Amazon’s long term view. I think Palantir is a great company over the long term and in 10 years time I think the share price will be at least $250 based on its growth rate.
I welcome any criticism of my analysis, I know it’s not a complete analysis but if I were to do that I’d be here all day. I think I’ve included the most important points anyway.
Original post from r/thevalueinvestor
Disclosure - I am long PLTR
Submitted March 09, 2021 at 10:07PM by GetRichSlowRetard https://ift.tt/3elVIRr
