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Let It Snow
2024-10-02
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Palantir's Valuation Is A Lord Of The Rings Fantasy
Let It Snow
2024-08-21
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2023-07-14
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It Snow","avatar":"https://community-static.tradeup.com/news/ccf75d1aa0649ec604ca0b7912bf14bb","crmLevel":8,"crmLevelSwitch":0,"followedFlag":false,"authorIdStr":"3579760554038249","idStr":"3579760554038249"},"themes":[],"htmlText":"o o","listText":"o o","text":"o o","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/355662849282112","repostId":"1152240833","repostType":4,"repost":{"id":"1152240833","kind":"news","pubTimestamp":1727839335,"share":"https://ttm.financial/m/news/1152240833?lang=&edition=fundamental","pubTime":"2024-10-02 11:22","market":"us","language":"en","title":"Palantir's Valuation Is A Lord Of The Rings Fantasy","url":"https://stock-news.laohu8.com/highlight/detail?id=1152240833","media":"seekingalpha","summary":"Does Palantir have the attributes of a premium-valued company?","content":"<html><head></head><body><h2 id=\"id_3527223762\" style=\"text-align: left;\">Summary</h2><ul style=\"\"><li><p>Palantir was one of my highest-ranking companies in a SaaS screen I created. The company’s “perfect on paper” with strong metrics, rapid revenue growth, rising margins and huge TAM.</p></li><li><p>Qualitatively, Palantir has a huge moat, compelling narrative and clear mission-statement.</p></li><li><p>The “black box” nature of the company’s services and its controversial CEO give me pause.</p></li><li><p>Valuation measures are off-the-charts overvalued and its entry into the S&P 500 could be viewed as the “Inclusion Curse”.</p></li></ul><h2 id=\"id_290446489\" style=\"text-align: left;\">Thesis</h2><p style=\"text-align: left;\">A few months back, I published an SA article entitled Screening for the Best SaaS Companies, in which I screened for the best SaaS companies out of a pool of 84 names. Palantir was the 10th highest-ranked company. The ranking was based on specialized metrics used by venture capitalists. This article’s goal is to concurrently convince you that Palantir is a great company but a terrible stock.</p><h2 id=\"id_56834654\" style=\"text-align: left;\">Introduction</h2><p style=\"text-align: left;\">Palantir (NYSE:PLTR) is an AI optimized company that helps organizations collect, normalize and utilize all forms of data so that organizations can make decisions. The company operates under two platforms: Gotham (for governments) and Foundry (for businesses) and more recently introduced Apollo which is a system that manages both Gotham and Foundry. Palantir was named after the mystical seeing stones in Lord of the Rings.</p><p style=\"text-align: left;\">Given the controversies over Palantir’s business and its stock’s valuation, I was both intrigued and motivated to look into this. I rarely give “Sell” recommendations except when I see clear-cut accounting or business model issues. Palantir would be the exception!</p><h2 id=\"id_2970024773\" style=\"text-align: left;\">Does Palantir have the attributes of a premium-valued company?</h2><p style=\"text-align: left;\">I’ll cut to the chase and say a “clear YES.” Palantir has several of these highly valued metrics, both qualitative and quantitative. <strong>Quantitatively</strong> they include:</p><p style=\"text-align: left;\">Access to a large and growing TAM (see Business Position section below) Strong Net Retention Rate (114% in 2Q’24, +400bps y/y) High gross margins and strong Unit Economics A history of earnings “beats & raises” High and growing Rule of 40 (Revenue growth + FCF Margin)</p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/64292e93129a51dcf5e39b2964dbd414\" alt=\"Rule of 40\" title=\"Rule of 40\" tg-width=\"640\" tg-height=\"295\"/><span>Rule of 40</span></p><p style=\"text-align: left;\"></p><p style=\"text-align: left;\"><strong>Qualitatively</strong> premium companies have a:</p><p style=\"text-align: left;\">Compelling Narrative and Mission Statement Strong business position and high entry barriers Unique service and clear value proposition High Net Promotor Scores (NPS) albeit Palantir’s 33 isn’t the highest. Diversifying customer-base Manageable risks Visionary leadership.</p><h2 id=\"id_2205772897\" style=\"text-align: left;\">Recent financial performance</h2><p style=\"text-align: left;\">Several SA contributors (such as The Techie) did a superb job at analyzing Palantir’s recent earnings results, so I won’t repeat them here. The TLDR is that 2Q’24’s earnings were great – represented by a bottom & top-line “beat & raise.” In fact, revenue growth is accelerating (see chart below).</p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/556d1910e41b4b5686ee21aacafd12b6\" alt=\"Growth\" title=\"Growth\" tg-width=\"640\" tg-height=\"342\"/><span>Growth</span></p><p style=\"text-align: left;\"></p><p style=\"text-align: left;\">The Commercial business segment, which was introduced subsequent to Palantir’s government business, started gaining momentum in late 2023 and demonstrates continued expansion and diversification (see Table).</p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/01bf04273ebe82caddea7ff7103dc00b\" alt=\"growth of govt vs business\" title=\"growth of govt vs business\" tg-width=\"640\" tg-height=\"236\"/><span>growth of govt vs business</span></p><p style=\"text-align: left;\"></p><h2 id=\"id_4274965912\" style=\"text-align: left;\">Business position and TAM</h2><p style=\"text-align: left;\">Palantir has a strong business position (up and to the right) as measured by Forrester’s Wave for AI and Machine Learning. Palantir estimated (in its S-1 filing) its TAM to be huge at$120BN. However, that estimate was previous to ChatGPT. Now, analysts such as Wedbush’s Dan Ives think its TAM could hit$1 trillion. This is an even larger opportunity-set (meaning Palantir’s revenue scale vs its TAM) than Nvidia’s (NVDA)!</p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/1b353ea026bd9a46752960b44d03afb5\" alt=\"Forrester Wave\" title=\"Forrester Wave\" tg-width=\"640\" tg-height=\"634\"/><span>Forrester Wave</span></p><p style=\"text-align: left;\"></p><h2 id=\"id_740308643\" style=\"text-align: left;\">The many controversies of Karp</h2><p style=\"text-align: left;\">When I analyze companies and founders, I always seek out opposing opinions to test my thesis. Palantir is “perfect on paper” however, there is circumstantial and anecdotal information that worries me. Palantir and Karp remind me of Tesla (TSLA) and Musk: two highly controversial figures surrounded by controversies. Without one, there isn’t the other.</p><p style=\"text-align: left;\">Alex Karp has never shied away from controversy. He is extremely pro-American and has picked winners & losers in the geopolitical chess game. These aren’t opinions without consequences - Palantir has provided AI and data analytics services to the U.S. intelligence agencies and military. Palantir has also been criticized for helping ICE (Immigration and Custom Enforcement) deport immigrants. Given the “black box” nature of Palantir’s business, it is not known if privacy and human rights are being violated.</p><h2 id=\"id_1430941454\" style=\"text-align: left;\">ESG and Glassdoor reviews</h2><p style=\"text-align: left;\">Despite the recent blowback in ESG and socially responsible investing, I consider it a key factor in investing as it helps to authentically align my values with investments. I rely on MSCI’s ESG ratings, of which Palantir is rated “B” Laggard within the software industry (see chart). I not only weigh Glassdoor’s ratings to broadly determine the “Social” factor of companies but to determine quality of management and culture. Palantir’s Glassdoor CEO approval rating is amongst the lowest (65%) that I’ve ever seen within the software space (chart below). Even Morningstar, which rarely has an unkind thing to say about management, stated that it “lacks confidence in the executive team” given that Palantir “recklessly” lost $300MM in SPAC investments, whereby those portfolio companies would be expected to purchase Palantir’s services. Speaking of odd holdings, Palantir had invested $51MM in gold bars in 2021 just in case there was a “Black Swan” event.</p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/ff09024a6445988f355c059edd4d83b5\" alt=\"ESG rating\" title=\"ESG rating\" tg-width=\"640\" tg-height=\"552\"/><span>ESG rating</span></p><p style=\"text-align: left;\"></p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/ed69bad5a5a9a8d18349c713a9135861\" alt=\"Glassdoor Ratings\" title=\"Glassdoor Ratings\" tg-width=\"640\" tg-height=\"494\"/><span>Glassdoor Ratings</span></p><p style=\"text-align: left;\"></p><h3 id=\"id_4125998872\" style=\"text-align: left;\">Other anecdotal evidence of a top in Palantir’s stock price:</h3><p style=\"text-align: left;\">Parabolic moves in the stock price combined with overhead resistance (see chart) Heavy Insider Selling, especially from the CEO and founders (Peter Thiel and Alex Karp) Concerns from several SA contributors A seasonally weak period for Palantir as well as risk-assets in general (chart) The S&P 500 “Inclusion Curse” The CEO’s continued “shelling” of the company wherever he speaks.</p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/38089939e23649bf966afd9cf0635e7c\" alt=\"Insider buying selling\" title=\"Insider buying selling\" tg-width=\"640\" tg-height=\"282\"/><span>Insider buying selling</span></p><p style=\"text-align: left;\"></p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/20e97590ee62b9fc7529915c2c63e09b\" alt=\"stock chart\" title=\"stock chart\" tg-width=\"640\" tg-height=\"295\"/><span>stock chart</span></p><p style=\"text-align: left;\"></p><h2 id=\"id_3704377079\" style=\"text-align: left;\">Seasonality</h2><p style=\"text-align: left;\">Besides trendlines, I’m a believer that sentiment and seasonality are proven contributors to a stock’s performance. Equities continue to remain in a seasonally weak period and Palantir has historically shown weakness during the Autumn period (see chart).</p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/8dcd4a3cd16e8c17eed053e473903575\" alt=\"seasonality of share price moves\" title=\"seasonality of share price moves\" tg-width=\"640\" tg-height=\"233\"/><span>seasonality of share price moves</span></p><p style=\"text-align: left;\"></p><h2 id=\"id_3959597449\" style=\"text-align: left;\">S&P 500 “Inclusion Curse”</h2><p style=\"text-align: left;\">On 9/6/2024, S&P Global announced that Palantir would join the S&P 500 on 9/23/2024. Shares rose 7% in after-hours trading on excitement that passive asset managers would be required to purchase its shares. However, studies have shown that any positive stock price gains during said announcements tend to lose their effectiveness over time. A S&P Dow Jones LLC study shows this in the chart below. I would argue that the effect has intensified since the study’s 2021 cut-off date. It also follows that this underperformance is likely to intensify when the inclusion date is around the S&P 500’s all-time-highs (as is the case now). I think most readers recall the excitement about Tesla (TSLA) entering the S&P 500 in Dec’20, to which the shares have underperformed since.</p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/51566a7b8ebb73341286941672c19b36\" alt=\"S&P 500 inclusion study\" title=\"S&P 500 inclusion study\" tg-width=\"640\" tg-height=\"292\"/><span>S&P 500 inclusion study</span></p><p style=\"text-align: left;\"></p><h2 id=\"id_1115392343\" style=\"text-align: left;\">Valuation</h2><p style=\"text-align: left;\">Palantir’s shares are over-valued using a multitude of metrics as presented in the table below. If one were to normalize Palantir’s valuation, shares could decline about 80% - a huge amount ! (Note that I use an “Adjusted Overvaluation” metric to eliminate duplicates and outliers).</p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/452f2e7c905620a59d8661bbae6fee2e\" alt=\"Valuation multiples\" title=\"Valuation multiples\" tg-width=\"640\" tg-height=\"375\"/><span>Valuation multiples</span></p><p style=\"text-align: left;\"></p><h2 id=\"id_1550243359\" style=\"text-align: left;\">The best valuation method</h2><p style=\"text-align: left;\">However, I would like to focus on <strong>EV/forward Revenues</strong> to determine what premium PLTR’s shares should trade at. Palantir’s EV/forward Rev. multiple, at <strong>28.6x</strong> is significantly above the 5.5x for the BVP NASDAQ Cloud Index. However, that 5.5x multiple is for the “average” company, not superstar Palantir. We would need to compare PLTR’s multiple with a regression line of forward revenue growth.</p><p style=\"text-align: left;\">Palantir shares trade above the regression line (28.6x versus the regression point of 12x) of revenue growth versus EV/forward Revenue multiples for the largest, best positioned SaaS companies as compiled by Bessemer Venture Partners. It is also above Meritech Capital’s SaaS regression line (regression point: 16x). (Note: it’s worth repeating that I not only compare PLTR to the average SaaS company, but to the largest premium names as well as those companies growing at a similar rate.)</p><p style=\"text-align: left;\">Based on the above analysis, Palantir’s shares could drop to around <strong>$20/share</strong> or 40-45% from current levels during this Bull market, and far lower if there’s a correction.</p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/02640f4bc9ec9be1dfa0c8a2e2eaf399\" alt=\"EV to Revenue multiples\" title=\"EV to Revenue multiples\" tg-width=\"640\" tg-height=\"329\"/><span>EV to Revenue multiples</span></p><p style=\"text-align: left;\"></p><h2 id=\"id_2642030854\" style=\"text-align: left;\">Conclusion:</h2><p style=\"text-align: left;\">I won't mince words. I have never had a good gut feeling about Palantir. It feels like a stock with a cult-like following. Now that I’ve done a deeper analysis, I stand by those feelings with concrete evidence and anecdotal findings. There are several top-performing SaaS companies to choose from. Palantir is the only company I would avoid, hence my "<strong>Strong</strong> <strong>Sell”</strong> rating.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Palantir's Valuation Is A Lord Of The Rings Fantasy</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nPalantir's Valuation Is A Lord Of The Rings Fantasy\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-10-02 11:22 GMT+8 <a href=https://seekingalpha.com/article/4724450-palantir-s-valuation-is-lord-of-rings-fantasy><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryPalantir was one of my highest-ranking companies in a SaaS screen I created. The company’s “perfect on paper” with strong metrics, rapid revenue growth, rising margins and huge TAM....</p>\n\n<a href=\"https://seekingalpha.com/article/4724450-palantir-s-valuation-is-lord-of-rings-fantasy\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"PLTR":"Palantir Technologies Inc."},"source_url":"https://seekingalpha.com/article/4724450-palantir-s-valuation-is-lord-of-rings-fantasy","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1152240833","content_text":"SummaryPalantir was one of my highest-ranking companies in a SaaS screen I created. The company’s “perfect on paper” with strong metrics, rapid revenue growth, rising margins and huge TAM.Qualitatively, Palantir has a huge moat, compelling narrative and clear mission-statement.The “black box” nature of the company’s services and its controversial CEO give me pause.Valuation measures are off-the-charts overvalued and its entry into the S&P 500 could be viewed as the “Inclusion Curse”.ThesisA few months back, I published an SA article entitled Screening for the Best SaaS Companies, in which I screened for the best SaaS companies out of a pool of 84 names. Palantir was the 10th highest-ranked company. The ranking was based on specialized metrics used by venture capitalists. This article’s goal is to concurrently convince you that Palantir is a great company but a terrible stock.IntroductionPalantir (NYSE:PLTR) is an AI optimized company that helps organizations collect, normalize and utilize all forms of data so that organizations can make decisions. The company operates under two platforms: Gotham (for governments) and Foundry (for businesses) and more recently introduced Apollo which is a system that manages both Gotham and Foundry. Palantir was named after the mystical seeing stones in Lord of the Rings.Given the controversies over Palantir’s business and its stock’s valuation, I was both intrigued and motivated to look into this. I rarely give “Sell” recommendations except when I see clear-cut accounting or business model issues. Palantir would be the exception!Does Palantir have the attributes of a premium-valued company?I’ll cut to the chase and say a “clear YES.” Palantir has several of these highly valued metrics, both qualitative and quantitative. Quantitatively they include:Access to a large and growing TAM (see Business Position section below) Strong Net Retention Rate (114% in 2Q’24, +400bps y/y) High gross margins and strong Unit Economics A history of earnings “beats & raises” High and growing Rule of 40 (Revenue growth + FCF Margin)Rule of 40Qualitatively premium companies have a:Compelling Narrative and Mission Statement Strong business position and high entry barriers Unique service and clear value proposition High Net Promotor Scores (NPS) albeit Palantir’s 33 isn’t the highest. Diversifying customer-base Manageable risks Visionary leadership.Recent financial performanceSeveral SA contributors (such as The Techie) did a superb job at analyzing Palantir’s recent earnings results, so I won’t repeat them here. The TLDR is that 2Q’24’s earnings were great – represented by a bottom & top-line “beat & raise.” In fact, revenue growth is accelerating (see chart below).GrowthThe Commercial business segment, which was introduced subsequent to Palantir’s government business, started gaining momentum in late 2023 and demonstrates continued expansion and diversification (see Table).growth of govt vs businessBusiness position and TAMPalantir has a strong business position (up and to the right) as measured by Forrester’s Wave for AI and Machine Learning. Palantir estimated (in its S-1 filing) its TAM to be huge at$120BN. However, that estimate was previous to ChatGPT. Now, analysts such as Wedbush’s Dan Ives think its TAM could hit$1 trillion. This is an even larger opportunity-set (meaning Palantir’s revenue scale vs its TAM) than Nvidia’s (NVDA)!Forrester WaveThe many controversies of KarpWhen I analyze companies and founders, I always seek out opposing opinions to test my thesis. Palantir is “perfect on paper” however, there is circumstantial and anecdotal information that worries me. Palantir and Karp remind me of Tesla (TSLA) and Musk: two highly controversial figures surrounded by controversies. Without one, there isn’t the other.Alex Karp has never shied away from controversy. He is extremely pro-American and has picked winners & losers in the geopolitical chess game. These aren’t opinions without consequences - Palantir has provided AI and data analytics services to the U.S. intelligence agencies and military. Palantir has also been criticized for helping ICE (Immigration and Custom Enforcement) deport immigrants. Given the “black box” nature of Palantir’s business, it is not known if privacy and human rights are being violated.ESG and Glassdoor reviewsDespite the recent blowback in ESG and socially responsible investing, I consider it a key factor in investing as it helps to authentically align my values with investments. I rely on MSCI’s ESG ratings, of which Palantir is rated “B” Laggard within the software industry (see chart). I not only weigh Glassdoor’s ratings to broadly determine the “Social” factor of companies but to determine quality of management and culture. Palantir’s Glassdoor CEO approval rating is amongst the lowest (65%) that I’ve ever seen within the software space (chart below). Even Morningstar, which rarely has an unkind thing to say about management, stated that it “lacks confidence in the executive team” given that Palantir “recklessly” lost $300MM in SPAC investments, whereby those portfolio companies would be expected to purchase Palantir’s services. Speaking of odd holdings, Palantir had invested $51MM in gold bars in 2021 just in case there was a “Black Swan” event.ESG ratingGlassdoor RatingsOther anecdotal evidence of a top in Palantir’s stock price:Parabolic moves in the stock price combined with overhead resistance (see chart) Heavy Insider Selling, especially from the CEO and founders (Peter Thiel and Alex Karp) Concerns from several SA contributors A seasonally weak period for Palantir as well as risk-assets in general (chart) The S&P 500 “Inclusion Curse” The CEO’s continued “shelling” of the company wherever he speaks.Insider buying sellingstock chartSeasonalityBesides trendlines, I’m a believer that sentiment and seasonality are proven contributors to a stock’s performance. Equities continue to remain in a seasonally weak period and Palantir has historically shown weakness during the Autumn period (see chart).seasonality of share price movesS&P 500 “Inclusion Curse”On 9/6/2024, S&P Global announced that Palantir would join the S&P 500 on 9/23/2024. Shares rose 7% in after-hours trading on excitement that passive asset managers would be required to purchase its shares. However, studies have shown that any positive stock price gains during said announcements tend to lose their effectiveness over time. A S&P Dow Jones LLC study shows this in the chart below. I would argue that the effect has intensified since the study’s 2021 cut-off date. It also follows that this underperformance is likely to intensify when the inclusion date is around the S&P 500’s all-time-highs (as is the case now). I think most readers recall the excitement about Tesla (TSLA) entering the S&P 500 in Dec’20, to which the shares have underperformed since.S&P 500 inclusion studyValuationPalantir’s shares are over-valued using a multitude of metrics as presented in the table below. If one were to normalize Palantir’s valuation, shares could decline about 80% - a huge amount ! (Note that I use an “Adjusted Overvaluation” metric to eliminate duplicates and outliers).Valuation multiplesThe best valuation methodHowever, I would like to focus on EV/forward Revenues to determine what premium PLTR’s shares should trade at. Palantir’s EV/forward Rev. multiple, at 28.6x is significantly above the 5.5x for the BVP NASDAQ Cloud Index. However, that 5.5x multiple is for the “average” company, not superstar Palantir. We would need to compare PLTR’s multiple with a regression line of forward revenue growth.Palantir shares trade above the regression line (28.6x versus the regression point of 12x) of revenue growth versus EV/forward Revenue multiples for the largest, best positioned SaaS companies as compiled by Bessemer Venture Partners. It is also above Meritech Capital’s SaaS regression line (regression point: 16x). (Note: it’s worth repeating that I not only compare PLTR to the average SaaS company, but to the largest premium names as well as those companies growing at a similar rate.)Based on the above analysis, Palantir’s shares could drop to around $20/share or 40-45% from current levels during this Bull market, and far lower if there’s a correction.EV to Revenue multiplesConclusion:I won't mince words. I have never had a good gut feeling about Palantir. It feels like a stock with a cult-like following. Now that I’ve done a deeper analysis, I stand by those feelings with concrete evidence and anecdotal findings. There are several top-performing SaaS companies to choose from. Palantir is the only company I would avoid, hence my \"Strong Sell” rating.","news_type":1},"isVote":1,"tweetType":1,"viewCount":127,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":340809393877120,"gmtCreate":1724236444849,"gmtModify":1724244723622,"author":{"id":"3579760554038249","authorId":"3579760554038249","name":"Let It Snow","avatar":"https://community-static.tradeup.com/news/ccf75d1aa0649ec604ca0b7912bf14bb","crmLevel":8,"crmLevelSwitch":0,"followedFlag":false,"authorIdStr":"3579760554038249","idStr":"3579760554038249"},"themes":[],"htmlText":"Really?","listText":"Really?","text":"Really?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/340809393877120","repostId":"2461864178","repostType":4,"isVote":1,"tweetType":1,"viewCount":245,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":197804576342064,"gmtCreate":1689326531146,"gmtModify":1689327684652,"author":{"id":"3579760554038249","authorId":"3579760554038249","name":"Let It Snow","avatar":"https://community-static.tradeup.com/news/ccf75d1aa0649ec604ca0b7912bf14bb","crmLevel":8,"crmLevelSwitch":0,"followedFlag":false,"authorIdStr":"3579760554038249","idStr":"3579760554038249"},"themes":[],"htmlText":"Share your opinion about this news…","listText":"Share your opinion about this news…","text":"Share your opinion about this news…","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/197804576342064","repostId":"1130744193","repostType":4,"isVote":1,"tweetType":1,"viewCount":210,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0}],"hots":[{"id":340809393877120,"gmtCreate":1724236444849,"gmtModify":1724244723622,"author":{"id":"3579760554038249","authorId":"3579760554038249","name":"Let It Snow","avatar":"https://community-static.tradeup.com/news/ccf75d1aa0649ec604ca0b7912bf14bb","crmLevel":8,"crmLevelSwitch":0,"followedFlag":false,"idStr":"3579760554038249","authorIdStr":"3579760554038249"},"themes":[],"htmlText":"Really?","listText":"Really?","text":"Really?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/340809393877120","repostId":"2461864178","repostType":4,"repost":{"id":"2461864178","kind":"highlight","pubTimestamp":1724221245,"share":"https://ttm.financial/m/news/2461864178?lang=&edition=fundamental","pubTime":"2024-08-21 14:20","market":"us","language":"en","title":"Palantir: Unjustified Investor Enthusiasm","url":"https://stock-news.laohu8.com/highlight/detail?id=2461864178","media":"seekingalpha","summary":"Palantir Technologies reports strong Q2 results, raises 2024 sales guidance, leading to improved investor sentiment.Sales growth driven by the US commercial sector, particularly Palantir AIP, with rec","content":"<html><head></head><body><ul style=\"\"><li><p>Palantir Technologies reports strong Q2 results, raises 2024 sales guidance, leading to improved investor sentiment.</p></li><li><p>Sales growth driven by the US commercial sector, particularly Palantir AIP, with recent big contract wins with the Department of Defense.</p></li><li><p>Despite robust growth, Palantir's overpriced valuation at 21x leading sales and 80x free cash flow multiples raises concerns for investors.</p></li></ul><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/ca0459f275b9aed733014624cae2dc80\" tg-width=\"750\" tg-height=\"500\"/></p><p>Michael Vi/iStock Editorial via Getty Images</p><p></p><p>Investor sentiment with respect to <strong><a href=\"https://laohu8.com/S/PLTR\">Palantir Technologies Inc.</a> (NYSE:PLTR) </strong>has substantially improved after the company reported better-than-expected second quarter results and raised its guidance for 2024 full-year sales.</p><p>Palantir Technologies’ sales skyrocketed 55% YoY in US commercial in 2Q24, leading the software/AI company to report its seventh consecutive GAAP profit.</p><p>Though Palantir Technologies is seeing robust interest in Palantir AIP and in 2Q24 secured a big contract win with the Department of Defense, I think that enthusiasm about the company’s growth prospects is not particularly justified and I see the stock as a value trap for investors.</p><p>Consequently, I need to reaffirm my previous Sell rating.</p><h2 id=\"id_1224299322\">My Rating History</h2><p>I voiced my concerns about Palantir Technologies’ valuation a few times in the past, but after a 48% increase in stock price since August 5, 2024, I think that the market’s present bullish sentiment is not sustainable.</p><p>The software/AI company had a robust second quarter and Palantir Technologies raised its sales forecast, but the stock has an unfavorable risk/reward relationship selling at 21x leading sales.</p><h2 id=\"id_306488542\">Robust Sales Growth, All The Momentum Is In US Commercial</h2><p>Palantir Technologies produced $678.1 million in sales in the second quarter with 55% of sales coming from government contracts. The remaining 45% came from private contracts, totaling $307.4 million.</p><p>Government-related sales rose 23% YoY whereas commercial-related sales were up 33% YoY. Palantir Technologies’ commercial sales volume was dominated by US companies paying for commercial services which accounted for 52% of all sales in 2Q24.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/4b057472d031d74d5c1b1264ab4c0f96\" tg-width=\"640\" tg-height=\"189\"/></p><p>Revenue (Palantir Technologies)</p><p></p><p>US Commercial is doing really well for Palantir Technologies right now and Palantir AIP is the company’s secret sauce. With more companies investing in AI to leverage its strength, Palantir Technologies is seeing robust growth in both its governmental and commercial businesses. Though Commercial has the momentum, and particularly US Commercial, Palantir Technologies is still profiting from its deep ties to the national security community.</p><p>For instance, Palantir Technologies secured a $480 million contract with the Chief Digital and Artificial Intelligence Office of the Department of Defense to scale AI capabilities in the second quarter. This contract has a length of 5 years and was kicked off with a $153 million initial order.</p><p>Palantir Technologies and Microsoft are also expanding their collaboration in terms of bringing secure cloud, analytics and artificial intelligence capabilities to the Pentagon and other national security institutions. The leverage point for Palantir Technologies here is Palantir AIP which is, effectively, an analytics platform for companies and government institutions alike that support strategic, data-driven decision-making.</p><p>Though I acknowledge the importance of Palantir AIP for the company’s sales growth, I think that Palantir Technologies has reached an unsustainable valuation level and the stock has reached a very vulnerable point technically as well.</p><h2 id=\"id_930331355\">Technical Analysis Section</h2><p>The stock price of Palantir Technologies reached a new 52-week high after the company’s earnings and is presently selling at $32.08. Since August 5, 2024 Palantir Technologies’ stock price increased roughly 48%.</p><p>According to the Relative Strength Index, the stock of Palantir Technologies is now just about to be overbought technically which creates a red flag from a sentiment perspective. After 2Q24 earnings, Palantir Technologies soared through both the 20-day and 50-day moving average lines, sending a short-term bullish signal for investors.</p><p>With that said, though, since the stock is overbought and has risen substantially in a very short period of time, I think that the sudden change in investor sentiment is a red flag, mainly because PLTR is so highly valued already.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/2e4f61237a6b17b9682335e9bf08a461\" tg-width=\"640\" tg-height=\"429\"/></p><p>Relative Strength Index (Stockcharts.com)</p><p></p><h2 id=\"id_3890074500\">Palantir Technologies Is Probably Widely Overpriced</h2><p>The forecast for the next quarter, 3Q24, calls for $697 - $701 million in sales which reflects a QoQ sales rise of 3%. For the full year, Palantir Technologies sees $2.742 - $2.750 billion in sales, up from a prior guidance of $2.677 – $2.689 billion. The new forecast implies 23% YoY sales growth.</p><p>The market currently models $3.34 billion in sales on average for next year which reflects 21% sales growth YoY. This year, sales are anticipated to go up 24% which is slightly better than Palantir Technologies’ guidance for 2024.</p><p>Based on a market valuation for the company’s equity, which stands at $72 billion, the stock of Palantir Technologies is selling at a 21.4x leading sales multiple.</p><p>This is an expensive price sticker, particularly when considering that one of biggest and most lucrative software companies in the world, <strong>Microsoft Corp. (MSFT)</strong>, is selling for only about half this leading sales multiple, 10.8x.</p><p></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/0b0e9c457c3eb6b3cc853d801b32d077\" tg-width=\"640\" tg-height=\"220\"/></p><p>Revenue Estimate (Yahoo Finance)</p><p></p><p>Palantir Technologies also anticipates to earn between $800 million and $1.0 billion in adjusted free cash flow in 2024 which reflects a free cash flow multiple of 80x. Previously, I arrived at an intrinsic value of $9 for Palantir Technologies’ stock, based on a more sensible 20x free cash flow multiple (which reflects a market valuation of $20 billion max).</p><p>I don’t see, specifically, what is so special about Palantir Technologies’ business proposition that would require investors to pay 80x free cash flow, particularly because the company’s growth is not that stunning.</p><p>Palantir Technologies is growing robustly, but not at the kinds of rates we have seen from <strong>Nvidia Corp. (NVDA)</strong>, for example. Thus, I continue to see Palantir Technologies’ valuation as unjustifiably inflated and I reiterate my ‘Sell’ stock classification.</p><p>My expectation moving forward is for Palantir Technologies to try to scale AIP, particularly in US Commercial which is where the software/AI company sees its biggest customer demand.</p><p>From this angle, Palantir Technologies does have an opportunity to grow its sales and free cash flow and, therefore, its intrinsic value (which I presently peg at $9).</p><p>I think that Palantir Technologies market valuation is presently significantly inflated at $71 billion and the stock, as I indicated, is vulnerable to a correction, particularly if the AI spending boom came to an end.</p><h2 id=\"id_3725494300\">Why The Investment Thesis Could Be More Bullish</h2><p>Companies clearly are spending more money on AI/software solutions in order to leverage advances in artificial intelligence which promise productivity growth. Palantir Technologies is sitting at the heart of software/AI developments which could set up a compelling picture for long-term profit and sales growth.</p><p>With that being said, though, Palantir Technologies does not have a unique value proposition, in my view, as other companies like Splunk, <strong>Microsoft Corporation (MSFT)</strong> or <strong>C3.ai Inc. (AI) </strong>also offer analytics products.</p><p>Should this change moving forward, and Palantir Technologies’ growth sustainably accelerates beyond 25% per annum, then I would be willing to revisit my investment thesis with regard to PLTR.</p><p>Palantir Technologies not long ago guided for long-term growth of 25% per annum, but fell below this threshold in recent years as its government business slowed. A recapture of this sales growth level might create new excitement for the stock, as well as lead to higher operating margins/free cash flows for Palantir Technologies.</p><p>Upside risks include a substantial spending boom in the AI market that could benefit both hardware and software vendors. An acceleration of sales growth obviously is a risk, as investors might miss out on any AIP-driven gains in Palantir Technologies’ business.</p><h2 id=\"id_3495858642\">My Conclusion</h2><p>Palantir Technologies raised its forecast for full-year sales and produced a respectable amount of growth in the second quarter. New contracts with the Department of Defense in terms of scaling AI capabilities and a more extensive collaboration with Microsoft to leverage AI capabilities for national security agencies were two big wins for Palantir Technologies as of late.</p><p>With that said, though, I think the valuation remains a thorny issue as I don’t see upside left on the table at such big sales and free cash flow multiples (and a boatload of correction potential).</p><p>Though I appreciate the progress that Palantir Technologies has made in recent quarters, the valuation, in my view, is not defensible nor sustainable. Investors that pay 80x free cash flow and 21x leading sales are probably buying into a value trap here. Sell.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Palantir: Unjustified Investor Enthusiasm</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; 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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nPalantir: Unjustified Investor Enthusiasm\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-08-21 14:20 GMT+8 <a href=https://seekingalpha.com/article/4716049-palantir-unjustified-investor-enthusiasm-pltr-stock><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Palantir Technologies reports strong Q2 results, raises 2024 sales guidance, leading to improved investor sentiment.Sales growth driven by the US commercial sector, particularly Palantir AIP, with ...</p>\n\n<a href=\"https://seekingalpha.com/article/4716049-palantir-unjustified-investor-enthusiasm-pltr-stock\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"LU0077335932.USD":"FIDELITY AMERICAN GROWTH \"A\" INC","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","IE00B7KXQ091.USD":"Janus Henderson Balanced A Inc USD","BK4543":"AI","IE00BLSP4239.USD":"Legg Mason ClearBridge - Tactical Dividend Income A Mdis USD Plus","BK4527":"明星科技股","IE00B5TLWC47.USD":"BNY MELLON LONG-TERM GLOBAL EQUITY \"B\" (USD) ACC","IE0004086264.USD":"BNY MELLON GLOBAL OPPORTUNITIES \"A\" (USD) ACC","IE0034235303.USD":"PINEBRIDGE US RESEARCH ENHANCED CORE EQUITY \"A\" (USD) ACC","IE00BFSS7M15.SGD":"Janus Henderson Balanced A Acc SGD-H","BK4503":"景林资产持仓","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","LU0072462426.USD":"贝莱德全球配置 A2","LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元","BK4547":"WSB热门概念","GB00B4QBRK32.GBP":"FUNDSMITH EQUITY \"R\" (GBP) INC","BK4581":"高盛持仓","IE00BZ199S13.USD":"BNY MELLON MOBILITY INNOVATION \"B\" (USD) ACC","BK4504":"桥水持仓","BK4549":"软银资本持仓","LU0061474960.USD":"天利环球焦点基金AU Acc","IE00BBT3K403.USD":"LEGG MASON CLEARBRIDGE TACTICAL DIVIDEND INCOME \"A(USD) ACC","IE00BMPRXR70.SGD":"Neuberger Berman 5G Connectivity A Acc SGD-H","BK4548":"巴美列捷福持仓","IE00BDRTCR15.USD":"PINEBRIDGE GLOBAL DYNAMIC ASSET ALLOCATION \"ADC\" (USD) INC A","IE0005OL40V9.USD":"JANUS HENDERSON BALANCED \"A6M\" (USD) INC","IE000W1ABFV2.USD":"PIMCO BALANCED INCOME AND GROWTH \"R\" (USD) INC","IE00BK4W5L77.USD":"HSBC GLOBAL FUNDS ICAV US EQUITY INDEX \"HC\" (USD) ACC","BK4554":"元宇宙及AR概念","IE00BWXC8680.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5\" (SGD) ACC","PLTR":"Palantir Technologies Inc.","BK4592":"伊斯兰概念","LU0006306889.USD":"SCHRODER ISF US LARGE CAP \"A\" (USD) INC AV","IE00B3SWFQ91.USD":"PIMCO BALANCED INCOME AND GROWTH \"E\" (USD) INC","IE00BK4W5M84.HKD":"HSBC GLOBAL FUNDS ICAV US EQUITY INDEX \"HC\" (HKD) ACC","BK4532":"文艺复兴科技持仓","LU0061474705.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN \"AU\" (USD) ACC","IE0003U64NQ7.SGD":"PIMCO BALANCED INCOME AND GROWTH \"M\" (SGDHDG) ACC","IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","IE00BMPRXQ63.HKD":"NEUBERGER BERMAN NEXT GENERATION CONNECTIVITY FUND \"A\" (HKDHDG) ACC","BK4534":"瑞士信贷持仓","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","IE000KEQY171.SGD":"PIMCO BALANCED INCOME AND GROWTH \"M\" (SGDHDG) INC","BK4533":"AQR资本管理(全球第二大对冲基金)","IE00BFSS8Q28.SGD":"Janus Henderson Balanced A Inc SGD-H","BK4525":"远程办公概念","LU0069063385.USD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"A\" (USD) ACC"},"source_url":"https://seekingalpha.com/article/4716049-palantir-unjustified-investor-enthusiasm-pltr-stock","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"2461864178","content_text":"Palantir Technologies reports strong Q2 results, raises 2024 sales guidance, leading to improved investor sentiment.Sales growth driven by the US commercial sector, particularly Palantir AIP, with recent big contract wins with the Department of Defense.Despite robust growth, Palantir's overpriced valuation at 21x leading sales and 80x free cash flow multiples raises concerns for investors.Michael Vi/iStock Editorial via Getty ImagesInvestor sentiment with respect to Palantir Technologies Inc. (NYSE:PLTR) has substantially improved after the company reported better-than-expected second quarter results and raised its guidance for 2024 full-year sales.Palantir Technologies’ sales skyrocketed 55% YoY in US commercial in 2Q24, leading the software/AI company to report its seventh consecutive GAAP profit.Though Palantir Technologies is seeing robust interest in Palantir AIP and in 2Q24 secured a big contract win with the Department of Defense, I think that enthusiasm about the company’s growth prospects is not particularly justified and I see the stock as a value trap for investors.Consequently, I need to reaffirm my previous Sell rating.My Rating HistoryI voiced my concerns about Palantir Technologies’ valuation a few times in the past, but after a 48% increase in stock price since August 5, 2024, I think that the market’s present bullish sentiment is not sustainable.The software/AI company had a robust second quarter and Palantir Technologies raised its sales forecast, but the stock has an unfavorable risk/reward relationship selling at 21x leading sales.Robust Sales Growth, All The Momentum Is In US CommercialPalantir Technologies produced $678.1 million in sales in the second quarter with 55% of sales coming from government contracts. The remaining 45% came from private contracts, totaling $307.4 million.Government-related sales rose 23% YoY whereas commercial-related sales were up 33% YoY. Palantir Technologies’ commercial sales volume was dominated by US companies paying for commercial services which accounted for 52% of all sales in 2Q24.Revenue (Palantir Technologies)US Commercial is doing really well for Palantir Technologies right now and Palantir AIP is the company’s secret sauce. With more companies investing in AI to leverage its strength, Palantir Technologies is seeing robust growth in both its governmental and commercial businesses. Though Commercial has the momentum, and particularly US Commercial, Palantir Technologies is still profiting from its deep ties to the national security community.For instance, Palantir Technologies secured a $480 million contract with the Chief Digital and Artificial Intelligence Office of the Department of Defense to scale AI capabilities in the second quarter. This contract has a length of 5 years and was kicked off with a $153 million initial order.Palantir Technologies and Microsoft are also expanding their collaboration in terms of bringing secure cloud, analytics and artificial intelligence capabilities to the Pentagon and other national security institutions. The leverage point for Palantir Technologies here is Palantir AIP which is, effectively, an analytics platform for companies and government institutions alike that support strategic, data-driven decision-making.Though I acknowledge the importance of Palantir AIP for the company’s sales growth, I think that Palantir Technologies has reached an unsustainable valuation level and the stock has reached a very vulnerable point technically as well.Technical Analysis SectionThe stock price of Palantir Technologies reached a new 52-week high after the company’s earnings and is presently selling at $32.08. Since August 5, 2024 Palantir Technologies’ stock price increased roughly 48%.According to the Relative Strength Index, the stock of Palantir Technologies is now just about to be overbought technically which creates a red flag from a sentiment perspective. After 2Q24 earnings, Palantir Technologies soared through both the 20-day and 50-day moving average lines, sending a short-term bullish signal for investors.With that said, though, since the stock is overbought and has risen substantially in a very short period of time, I think that the sudden change in investor sentiment is a red flag, mainly because PLTR is so highly valued already.Relative Strength Index (Stockcharts.com)Palantir Technologies Is Probably Widely OverpricedThe forecast for the next quarter, 3Q24, calls for $697 - $701 million in sales which reflects a QoQ sales rise of 3%. For the full year, Palantir Technologies sees $2.742 - $2.750 billion in sales, up from a prior guidance of $2.677 – $2.689 billion. The new forecast implies 23% YoY sales growth.The market currently models $3.34 billion in sales on average for next year which reflects 21% sales growth YoY. This year, sales are anticipated to go up 24% which is slightly better than Palantir Technologies’ guidance for 2024.Based on a market valuation for the company’s equity, which stands at $72 billion, the stock of Palantir Technologies is selling at a 21.4x leading sales multiple.This is an expensive price sticker, particularly when considering that one of biggest and most lucrative software companies in the world, Microsoft Corp. (MSFT), is selling for only about half this leading sales multiple, 10.8x.Revenue Estimate (Yahoo Finance)Palantir Technologies also anticipates to earn between $800 million and $1.0 billion in adjusted free cash flow in 2024 which reflects a free cash flow multiple of 80x. Previously, I arrived at an intrinsic value of $9 for Palantir Technologies’ stock, based on a more sensible 20x free cash flow multiple (which reflects a market valuation of $20 billion max).I don’t see, specifically, what is so special about Palantir Technologies’ business proposition that would require investors to pay 80x free cash flow, particularly because the company’s growth is not that stunning.Palantir Technologies is growing robustly, but not at the kinds of rates we have seen from Nvidia Corp. (NVDA), for example. Thus, I continue to see Palantir Technologies’ valuation as unjustifiably inflated and I reiterate my ‘Sell’ stock classification.My expectation moving forward is for Palantir Technologies to try to scale AIP, particularly in US Commercial which is where the software/AI company sees its biggest customer demand.From this angle, Palantir Technologies does have an opportunity to grow its sales and free cash flow and, therefore, its intrinsic value (which I presently peg at $9).I think that Palantir Technologies market valuation is presently significantly inflated at $71 billion and the stock, as I indicated, is vulnerable to a correction, particularly if the AI spending boom came to an end.Why The Investment Thesis Could Be More BullishCompanies clearly are spending more money on AI/software solutions in order to leverage advances in artificial intelligence which promise productivity growth. Palantir Technologies is sitting at the heart of software/AI developments which could set up a compelling picture for long-term profit and sales growth.With that being said, though, Palantir Technologies does not have a unique value proposition, in my view, as other companies like Splunk, Microsoft Corporation (MSFT) or C3.ai Inc. (AI) also offer analytics products.Should this change moving forward, and Palantir Technologies’ growth sustainably accelerates beyond 25% per annum, then I would be willing to revisit my investment thesis with regard to PLTR.Palantir Technologies not long ago guided for long-term growth of 25% per annum, but fell below this threshold in recent years as its government business slowed. A recapture of this sales growth level might create new excitement for the stock, as well as lead to higher operating margins/free cash flows for Palantir Technologies.Upside risks include a substantial spending boom in the AI market that could benefit both hardware and software vendors. An acceleration of sales growth obviously is a risk, as investors might miss out on any AIP-driven gains in Palantir Technologies’ business.My ConclusionPalantir Technologies raised its forecast for full-year sales and produced a respectable amount of growth in the second quarter. New contracts with the Department of Defense in terms of scaling AI capabilities and a more extensive collaboration with Microsoft to leverage AI capabilities for national security agencies were two big wins for Palantir Technologies as of late.With that said, though, I think the valuation remains a thorny issue as I don’t see upside left on the table at such big sales and free cash flow multiples (and a boatload of correction potential).Though I appreciate the progress that Palantir Technologies has made in recent quarters, the valuation, in my view, is not defensible nor sustainable. Investors that pay 80x free cash flow and 21x leading sales are probably buying into a value trap here. Sell.","news_type":1},"isVote":1,"tweetType":1,"viewCount":245,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":355662849282112,"gmtCreate":1727841223657,"gmtModify":1727847450853,"author":{"id":"3579760554038249","authorId":"3579760554038249","name":"Let It Snow","avatar":"https://community-static.tradeup.com/news/ccf75d1aa0649ec604ca0b7912bf14bb","crmLevel":8,"crmLevelSwitch":0,"followedFlag":false,"idStr":"3579760554038249","authorIdStr":"3579760554038249"},"themes":[],"htmlText":"o o","listText":"o o","text":"o o","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/355662849282112","repostId":"1152240833","repostType":4,"repost":{"id":"1152240833","kind":"news","pubTimestamp":1727839335,"share":"https://ttm.financial/m/news/1152240833?lang=&edition=fundamental","pubTime":"2024-10-02 11:22","market":"us","language":"en","title":"Palantir's Valuation Is A Lord Of The Rings Fantasy","url":"https://stock-news.laohu8.com/highlight/detail?id=1152240833","media":"seekingalpha","summary":"Does Palantir have the attributes of a premium-valued company?","content":"<html><head></head><body><h2 id=\"id_3527223762\" style=\"text-align: left;\">Summary</h2><ul style=\"\"><li><p>Palantir was one of my highest-ranking companies in a SaaS screen I created. The company’s “perfect on paper” with strong metrics, rapid revenue growth, rising margins and huge TAM.</p></li><li><p>Qualitatively, Palantir has a huge moat, compelling narrative and clear mission-statement.</p></li><li><p>The “black box” nature of the company’s services and its controversial CEO give me pause.</p></li><li><p>Valuation measures are off-the-charts overvalued and its entry into the S&P 500 could be viewed as the “Inclusion Curse”.</p></li></ul><h2 id=\"id_290446489\" style=\"text-align: left;\">Thesis</h2><p style=\"text-align: left;\">A few months back, I published an SA article entitled Screening for the Best SaaS Companies, in which I screened for the best SaaS companies out of a pool of 84 names. Palantir was the 10th highest-ranked company. The ranking was based on specialized metrics used by venture capitalists. This article’s goal is to concurrently convince you that Palantir is a great company but a terrible stock.</p><h2 id=\"id_56834654\" style=\"text-align: left;\">Introduction</h2><p style=\"text-align: left;\">Palantir (NYSE:PLTR) is an AI optimized company that helps organizations collect, normalize and utilize all forms of data so that organizations can make decisions. The company operates under two platforms: Gotham (for governments) and Foundry (for businesses) and more recently introduced Apollo which is a system that manages both Gotham and Foundry. Palantir was named after the mystical seeing stones in Lord of the Rings.</p><p style=\"text-align: left;\">Given the controversies over Palantir’s business and its stock’s valuation, I was both intrigued and motivated to look into this. I rarely give “Sell” recommendations except when I see clear-cut accounting or business model issues. Palantir would be the exception!</p><h2 id=\"id_2970024773\" style=\"text-align: left;\">Does Palantir have the attributes of a premium-valued company?</h2><p style=\"text-align: left;\">I’ll cut to the chase and say a “clear YES.” Palantir has several of these highly valued metrics, both qualitative and quantitative. <strong>Quantitatively</strong> they include:</p><p style=\"text-align: left;\">Access to a large and growing TAM (see Business Position section below) Strong Net Retention Rate (114% in 2Q’24, +400bps y/y) High gross margins and strong Unit Economics A history of earnings “beats & raises” High and growing Rule of 40 (Revenue growth + FCF Margin)</p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/64292e93129a51dcf5e39b2964dbd414\" alt=\"Rule of 40\" title=\"Rule of 40\" tg-width=\"640\" tg-height=\"295\"/><span>Rule of 40</span></p><p style=\"text-align: left;\"></p><p style=\"text-align: left;\"><strong>Qualitatively</strong> premium companies have a:</p><p style=\"text-align: left;\">Compelling Narrative and Mission Statement Strong business position and high entry barriers Unique service and clear value proposition High Net Promotor Scores (NPS) albeit Palantir’s 33 isn’t the highest. Diversifying customer-base Manageable risks Visionary leadership.</p><h2 id=\"id_2205772897\" style=\"text-align: left;\">Recent financial performance</h2><p style=\"text-align: left;\">Several SA contributors (such as The Techie) did a superb job at analyzing Palantir’s recent earnings results, so I won’t repeat them here. The TLDR is that 2Q’24’s earnings were great – represented by a bottom & top-line “beat & raise.” In fact, revenue growth is accelerating (see chart below).</p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/556d1910e41b4b5686ee21aacafd12b6\" alt=\"Growth\" title=\"Growth\" tg-width=\"640\" tg-height=\"342\"/><span>Growth</span></p><p style=\"text-align: left;\"></p><p style=\"text-align: left;\">The Commercial business segment, which was introduced subsequent to Palantir’s government business, started gaining momentum in late 2023 and demonstrates continued expansion and diversification (see Table).</p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/01bf04273ebe82caddea7ff7103dc00b\" alt=\"growth of govt vs business\" title=\"growth of govt vs business\" tg-width=\"640\" tg-height=\"236\"/><span>growth of govt vs business</span></p><p style=\"text-align: left;\"></p><h2 id=\"id_4274965912\" style=\"text-align: left;\">Business position and TAM</h2><p style=\"text-align: left;\">Palantir has a strong business position (up and to the right) as measured by Forrester’s Wave for AI and Machine Learning. Palantir estimated (in its S-1 filing) its TAM to be huge at$120BN. However, that estimate was previous to ChatGPT. Now, analysts such as Wedbush’s Dan Ives think its TAM could hit$1 trillion. This is an even larger opportunity-set (meaning Palantir’s revenue scale vs its TAM) than Nvidia’s (NVDA)!</p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/1b353ea026bd9a46752960b44d03afb5\" alt=\"Forrester Wave\" title=\"Forrester Wave\" tg-width=\"640\" tg-height=\"634\"/><span>Forrester Wave</span></p><p style=\"text-align: left;\"></p><h2 id=\"id_740308643\" style=\"text-align: left;\">The many controversies of Karp</h2><p style=\"text-align: left;\">When I analyze companies and founders, I always seek out opposing opinions to test my thesis. Palantir is “perfect on paper” however, there is circumstantial and anecdotal information that worries me. Palantir and Karp remind me of Tesla (TSLA) and Musk: two highly controversial figures surrounded by controversies. Without one, there isn’t the other.</p><p style=\"text-align: left;\">Alex Karp has never shied away from controversy. He is extremely pro-American and has picked winners & losers in the geopolitical chess game. These aren’t opinions without consequences - Palantir has provided AI and data analytics services to the U.S. intelligence agencies and military. Palantir has also been criticized for helping ICE (Immigration and Custom Enforcement) deport immigrants. Given the “black box” nature of Palantir’s business, it is not known if privacy and human rights are being violated.</p><h2 id=\"id_1430941454\" style=\"text-align: left;\">ESG and Glassdoor reviews</h2><p style=\"text-align: left;\">Despite the recent blowback in ESG and socially responsible investing, I consider it a key factor in investing as it helps to authentically align my values with investments. I rely on MSCI’s ESG ratings, of which Palantir is rated “B” Laggard within the software industry (see chart). I not only weigh Glassdoor’s ratings to broadly determine the “Social” factor of companies but to determine quality of management and culture. Palantir’s Glassdoor CEO approval rating is amongst the lowest (65%) that I’ve ever seen within the software space (chart below). Even Morningstar, which rarely has an unkind thing to say about management, stated that it “lacks confidence in the executive team” given that Palantir “recklessly” lost $300MM in SPAC investments, whereby those portfolio companies would be expected to purchase Palantir’s services. Speaking of odd holdings, Palantir had invested $51MM in gold bars in 2021 just in case there was a “Black Swan” event.</p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/ff09024a6445988f355c059edd4d83b5\" alt=\"ESG rating\" title=\"ESG rating\" tg-width=\"640\" tg-height=\"552\"/><span>ESG rating</span></p><p style=\"text-align: left;\"></p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/ed69bad5a5a9a8d18349c713a9135861\" alt=\"Glassdoor Ratings\" title=\"Glassdoor Ratings\" tg-width=\"640\" tg-height=\"494\"/><span>Glassdoor Ratings</span></p><p style=\"text-align: left;\"></p><h3 id=\"id_4125998872\" style=\"text-align: left;\">Other anecdotal evidence of a top in Palantir’s stock price:</h3><p style=\"text-align: left;\">Parabolic moves in the stock price combined with overhead resistance (see chart) Heavy Insider Selling, especially from the CEO and founders (Peter Thiel and Alex Karp) Concerns from several SA contributors A seasonally weak period for Palantir as well as risk-assets in general (chart) The S&P 500 “Inclusion Curse” The CEO’s continued “shelling” of the company wherever he speaks.</p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/38089939e23649bf966afd9cf0635e7c\" alt=\"Insider buying selling\" title=\"Insider buying selling\" tg-width=\"640\" tg-height=\"282\"/><span>Insider buying selling</span></p><p style=\"text-align: left;\"></p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/20e97590ee62b9fc7529915c2c63e09b\" alt=\"stock chart\" title=\"stock chart\" tg-width=\"640\" tg-height=\"295\"/><span>stock chart</span></p><p style=\"text-align: left;\"></p><h2 id=\"id_3704377079\" style=\"text-align: left;\">Seasonality</h2><p style=\"text-align: left;\">Besides trendlines, I’m a believer that sentiment and seasonality are proven contributors to a stock’s performance. Equities continue to remain in a seasonally weak period and Palantir has historically shown weakness during the Autumn period (see chart).</p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/8dcd4a3cd16e8c17eed053e473903575\" alt=\"seasonality of share price moves\" title=\"seasonality of share price moves\" tg-width=\"640\" tg-height=\"233\"/><span>seasonality of share price moves</span></p><p style=\"text-align: left;\"></p><h2 id=\"id_3959597449\" style=\"text-align: left;\">S&P 500 “Inclusion Curse”</h2><p style=\"text-align: left;\">On 9/6/2024, S&P Global announced that Palantir would join the S&P 500 on 9/23/2024. Shares rose 7% in after-hours trading on excitement that passive asset managers would be required to purchase its shares. However, studies have shown that any positive stock price gains during said announcements tend to lose their effectiveness over time. A S&P Dow Jones LLC study shows this in the chart below. I would argue that the effect has intensified since the study’s 2021 cut-off date. It also follows that this underperformance is likely to intensify when the inclusion date is around the S&P 500’s all-time-highs (as is the case now). I think most readers recall the excitement about Tesla (TSLA) entering the S&P 500 in Dec’20, to which the shares have underperformed since.</p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/51566a7b8ebb73341286941672c19b36\" alt=\"S&P 500 inclusion study\" title=\"S&P 500 inclusion study\" tg-width=\"640\" tg-height=\"292\"/><span>S&P 500 inclusion study</span></p><p style=\"text-align: left;\"></p><h2 id=\"id_1115392343\" style=\"text-align: left;\">Valuation</h2><p style=\"text-align: left;\">Palantir’s shares are over-valued using a multitude of metrics as presented in the table below. If one were to normalize Palantir’s valuation, shares could decline about 80% - a huge amount ! (Note that I use an “Adjusted Overvaluation” metric to eliminate duplicates and outliers).</p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/452f2e7c905620a59d8661bbae6fee2e\" alt=\"Valuation multiples\" title=\"Valuation multiples\" tg-width=\"640\" tg-height=\"375\"/><span>Valuation multiples</span></p><p style=\"text-align: left;\"></p><h2 id=\"id_1550243359\" style=\"text-align: left;\">The best valuation method</h2><p style=\"text-align: left;\">However, I would like to focus on <strong>EV/forward Revenues</strong> to determine what premium PLTR’s shares should trade at. Palantir’s EV/forward Rev. multiple, at <strong>28.6x</strong> is significantly above the 5.5x for the BVP NASDAQ Cloud Index. However, that 5.5x multiple is for the “average” company, not superstar Palantir. We would need to compare PLTR’s multiple with a regression line of forward revenue growth.</p><p style=\"text-align: left;\">Palantir shares trade above the regression line (28.6x versus the regression point of 12x) of revenue growth versus EV/forward Revenue multiples for the largest, best positioned SaaS companies as compiled by Bessemer Venture Partners. It is also above Meritech Capital’s SaaS regression line (regression point: 16x). (Note: it’s worth repeating that I not only compare PLTR to the average SaaS company, but to the largest premium names as well as those companies growing at a similar rate.)</p><p style=\"text-align: left;\">Based on the above analysis, Palantir’s shares could drop to around <strong>$20/share</strong> or 40-45% from current levels during this Bull market, and far lower if there’s a correction.</p><p style=\"text-align: left;\"></p><p class=\"t-img-caption\"><img src=\"https://community-static.tradeup.com/news/02640f4bc9ec9be1dfa0c8a2e2eaf399\" alt=\"EV to Revenue multiples\" title=\"EV to Revenue multiples\" tg-width=\"640\" tg-height=\"329\"/><span>EV to Revenue multiples</span></p><p style=\"text-align: left;\"></p><h2 id=\"id_2642030854\" style=\"text-align: left;\">Conclusion:</h2><p style=\"text-align: left;\">I won't mince words. I have never had a good gut feeling about Palantir. It feels like a stock with a cult-like following. Now that I’ve done a deeper analysis, I stand by those feelings with concrete evidence and anecdotal findings. There are several top-performing SaaS companies to choose from. Palantir is the only company I would avoid, hence my "<strong>Strong</strong> <strong>Sell”</strong> rating.</p></body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Palantir's Valuation Is A Lord Of The Rings Fantasy</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nPalantir's Valuation Is A Lord Of The Rings Fantasy\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-10-02 11:22 GMT+8 <a href=https://seekingalpha.com/article/4724450-palantir-s-valuation-is-lord-of-rings-fantasy><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>SummaryPalantir was one of my highest-ranking companies in a SaaS screen I created. The company’s “perfect on paper” with strong metrics, rapid revenue growth, rising margins and huge TAM....</p>\n\n<a href=\"https://seekingalpha.com/article/4724450-palantir-s-valuation-is-lord-of-rings-fantasy\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"PLTR":"Palantir Technologies Inc."},"source_url":"https://seekingalpha.com/article/4724450-palantir-s-valuation-is-lord-of-rings-fantasy","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1152240833","content_text":"SummaryPalantir was one of my highest-ranking companies in a SaaS screen I created. The company’s “perfect on paper” with strong metrics, rapid revenue growth, rising margins and huge TAM.Qualitatively, Palantir has a huge moat, compelling narrative and clear mission-statement.The “black box” nature of the company’s services and its controversial CEO give me pause.Valuation measures are off-the-charts overvalued and its entry into the S&P 500 could be viewed as the “Inclusion Curse”.ThesisA few months back, I published an SA article entitled Screening for the Best SaaS Companies, in which I screened for the best SaaS companies out of a pool of 84 names. Palantir was the 10th highest-ranked company. The ranking was based on specialized metrics used by venture capitalists. This article’s goal is to concurrently convince you that Palantir is a great company but a terrible stock.IntroductionPalantir (NYSE:PLTR) is an AI optimized company that helps organizations collect, normalize and utilize all forms of data so that organizations can make decisions. The company operates under two platforms: Gotham (for governments) and Foundry (for businesses) and more recently introduced Apollo which is a system that manages both Gotham and Foundry. Palantir was named after the mystical seeing stones in Lord of the Rings.Given the controversies over Palantir’s business and its stock’s valuation, I was both intrigued and motivated to look into this. I rarely give “Sell” recommendations except when I see clear-cut accounting or business model issues. Palantir would be the exception!Does Palantir have the attributes of a premium-valued company?I’ll cut to the chase and say a “clear YES.” Palantir has several of these highly valued metrics, both qualitative and quantitative. Quantitatively they include:Access to a large and growing TAM (see Business Position section below) Strong Net Retention Rate (114% in 2Q’24, +400bps y/y) High gross margins and strong Unit Economics A history of earnings “beats & raises” High and growing Rule of 40 (Revenue growth + FCF Margin)Rule of 40Qualitatively premium companies have a:Compelling Narrative and Mission Statement Strong business position and high entry barriers Unique service and clear value proposition High Net Promotor Scores (NPS) albeit Palantir’s 33 isn’t the highest. Diversifying customer-base Manageable risks Visionary leadership.Recent financial performanceSeveral SA contributors (such as The Techie) did a superb job at analyzing Palantir’s recent earnings results, so I won’t repeat them here. The TLDR is that 2Q’24’s earnings were great – represented by a bottom & top-line “beat & raise.” In fact, revenue growth is accelerating (see chart below).GrowthThe Commercial business segment, which was introduced subsequent to Palantir’s government business, started gaining momentum in late 2023 and demonstrates continued expansion and diversification (see Table).growth of govt vs businessBusiness position and TAMPalantir has a strong business position (up and to the right) as measured by Forrester’s Wave for AI and Machine Learning. Palantir estimated (in its S-1 filing) its TAM to be huge at$120BN. However, that estimate was previous to ChatGPT. Now, analysts such as Wedbush’s Dan Ives think its TAM could hit$1 trillion. This is an even larger opportunity-set (meaning Palantir’s revenue scale vs its TAM) than Nvidia’s (NVDA)!Forrester WaveThe many controversies of KarpWhen I analyze companies and founders, I always seek out opposing opinions to test my thesis. Palantir is “perfect on paper” however, there is circumstantial and anecdotal information that worries me. Palantir and Karp remind me of Tesla (TSLA) and Musk: two highly controversial figures surrounded by controversies. Without one, there isn’t the other.Alex Karp has never shied away from controversy. He is extremely pro-American and has picked winners & losers in the geopolitical chess game. These aren’t opinions without consequences - Palantir has provided AI and data analytics services to the U.S. intelligence agencies and military. Palantir has also been criticized for helping ICE (Immigration and Custom Enforcement) deport immigrants. Given the “black box” nature of Palantir’s business, it is not known if privacy and human rights are being violated.ESG and Glassdoor reviewsDespite the recent blowback in ESG and socially responsible investing, I consider it a key factor in investing as it helps to authentically align my values with investments. I rely on MSCI’s ESG ratings, of which Palantir is rated “B” Laggard within the software industry (see chart). I not only weigh Glassdoor’s ratings to broadly determine the “Social” factor of companies but to determine quality of management and culture. Palantir’s Glassdoor CEO approval rating is amongst the lowest (65%) that I’ve ever seen within the software space (chart below). Even Morningstar, which rarely has an unkind thing to say about management, stated that it “lacks confidence in the executive team” given that Palantir “recklessly” lost $300MM in SPAC investments, whereby those portfolio companies would be expected to purchase Palantir’s services. Speaking of odd holdings, Palantir had invested $51MM in gold bars in 2021 just in case there was a “Black Swan” event.ESG ratingGlassdoor RatingsOther anecdotal evidence of a top in Palantir’s stock price:Parabolic moves in the stock price combined with overhead resistance (see chart) Heavy Insider Selling, especially from the CEO and founders (Peter Thiel and Alex Karp) Concerns from several SA contributors A seasonally weak period for Palantir as well as risk-assets in general (chart) The S&P 500 “Inclusion Curse” The CEO’s continued “shelling” of the company wherever he speaks.Insider buying sellingstock chartSeasonalityBesides trendlines, I’m a believer that sentiment and seasonality are proven contributors to a stock’s performance. Equities continue to remain in a seasonally weak period and Palantir has historically shown weakness during the Autumn period (see chart).seasonality of share price movesS&P 500 “Inclusion Curse”On 9/6/2024, S&P Global announced that Palantir would join the S&P 500 on 9/23/2024. Shares rose 7% in after-hours trading on excitement that passive asset managers would be required to purchase its shares. However, studies have shown that any positive stock price gains during said announcements tend to lose their effectiveness over time. A S&P Dow Jones LLC study shows this in the chart below. I would argue that the effect has intensified since the study’s 2021 cut-off date. It also follows that this underperformance is likely to intensify when the inclusion date is around the S&P 500’s all-time-highs (as is the case now). I think most readers recall the excitement about Tesla (TSLA) entering the S&P 500 in Dec’20, to which the shares have underperformed since.S&P 500 inclusion studyValuationPalantir’s shares are over-valued using a multitude of metrics as presented in the table below. If one were to normalize Palantir’s valuation, shares could decline about 80% - a huge amount ! (Note that I use an “Adjusted Overvaluation” metric to eliminate duplicates and outliers).Valuation multiplesThe best valuation methodHowever, I would like to focus on EV/forward Revenues to determine what premium PLTR’s shares should trade at. Palantir’s EV/forward Rev. multiple, at 28.6x is significantly above the 5.5x for the BVP NASDAQ Cloud Index. However, that 5.5x multiple is for the “average” company, not superstar Palantir. We would need to compare PLTR’s multiple with a regression line of forward revenue growth.Palantir shares trade above the regression line (28.6x versus the regression point of 12x) of revenue growth versus EV/forward Revenue multiples for the largest, best positioned SaaS companies as compiled by Bessemer Venture Partners. It is also above Meritech Capital’s SaaS regression line (regression point: 16x). (Note: it’s worth repeating that I not only compare PLTR to the average SaaS company, but to the largest premium names as well as those companies growing at a similar rate.)Based on the above analysis, Palantir’s shares could drop to around $20/share or 40-45% from current levels during this Bull market, and far lower if there’s a correction.EV to Revenue multiplesConclusion:I won't mince words. I have never had a good gut feeling about Palantir. It feels like a stock with a cult-like following. Now that I’ve done a deeper analysis, I stand by those feelings with concrete evidence and anecdotal findings. There are several top-performing SaaS companies to choose from. Palantir is the only company I would avoid, hence my \"Strong Sell” rating.","news_type":1},"isVote":1,"tweetType":1,"viewCount":127,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0},{"id":197804576342064,"gmtCreate":1689326531146,"gmtModify":1689327684652,"author":{"id":"3579760554038249","authorId":"3579760554038249","name":"Let It Snow","avatar":"https://community-static.tradeup.com/news/ccf75d1aa0649ec604ca0b7912bf14bb","crmLevel":8,"crmLevelSwitch":0,"followedFlag":false,"idStr":"3579760554038249","authorIdStr":"3579760554038249"},"themes":[],"htmlText":"Share your opinion about this news…","listText":"Share your opinion about this news…","text":"Share your opinion about this news…","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/197804576342064","repostId":"1130744193","repostType":4,"repost":{"id":"1130744193","kind":"news","pubTimestamp":1689326229,"share":"https://ttm.financial/m/news/1130744193?lang=&edition=fundamental","pubTime":"2023-07-14 17:17","market":"other","language":"en","title":"Cathie Wood's Ark Invest Makes Major Quantum-Si Purchase — Loads Up On 1.4M Shares Of Semiconductor Firm","url":"https://stock-news.laohu8.com/highlight/detail?id=1130744193","media":"Benzinga","summary":"Ark Invest, led by Cathie Wood, made some significant trades on Thursday. The most notable was the purchase of over 1.4 million shares in the semiconductor company Quantum-Si Inc. The transaction was valued at $3.7 million based on Thursday’s closing price of $2.58.The Quantum-Si TradeArk Invest has been consistently buying shares of Quantum-Si since its listing, with the latest purchase being the largest so far. Quantum-Si, a semiconductor company, has seen a steady rise in its stock price sinc","content":"<html><head></head><body><p><strong>Ark Invest</strong>, led by <strong>Cathie Wood</strong>, made some significant trades on Thursday. The most notable was the purchase of over 1.4 million shares in the semiconductor company <strong>Quantum-Si Inc</strong>. The transaction was valued at $3.7 million based on Thursday’s closing price of $2.58.</p><p style=\"text-align: start;\"><strong>The Quantum-Si Trade</strong></p><p style=\"text-align: start;\">Ark Invest has been consistently buying shares of <strong>Quantum-Si</strong> since its listing, with the latest purchase being the largest so far. Quantum-Si, a semiconductor company, has seen a steady rise in its stock price since its listing.</p><p style=\"text-align: start;\">Ark has deployed its healthcare-focused <strong>Ark Genomic Revolution ETF</strong> (ARKG) to buy the shares. Quantum-Si is targeting a $21 billion market and believes it has a scalable semiconductor chip that could expand to home testing sometime after the year 2024.</p><p>Ark Invest also sold 73,100 shares, worth $977,347 — based on Thursday’s closing price of $13.37, of <strong>Kratos Defense & Security</strong> from its <strong>ARK Autonomous Technology & Robotics ETF</strong> (ARKQ) and <strong>ARK Space Exploration & Innovation ETF</strong> (ARKX).</p><p><strong>Other Key Trades:</strong></p><ul><li><p>Ark Invest sold 131,922 shares of <strong>Codexis Inc </strong>through ARKG</p></li><li><p>ARKG also sold 2,842 shares of <strong>Schrodinger Inc</strong></p></li><li><p>The ARKQ ETF bought 7,712 shares of <strong>Teradyne Inc</strong>. ARKX picked up another 1,868 shares in the automatic test equipment manufacturer.</p></li></ul></body></html>","source":"lsy1606299360108","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Cathie Wood's Ark Invest Makes Major Quantum-Si Purchase — Loads Up On 1.4M Shares Of Semiconductor Firm</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nCathie Wood's Ark Invest Makes Major Quantum-Si Purchase — Loads Up On 1.4M Shares Of Semiconductor Firm\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-07-14 17:17 GMT+8 <a href=https://www.benzinga.com/markets/equities/23/07/33226459/cathie-woods-ark-invest-makes-major-quantum-si-purchase-loads-up-on-1-4m-shares-of-semiconductor><strong>Benzinga</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Ark Invest, led by Cathie Wood, made some significant trades on Thursday. The most notable was the purchase of over 1.4 million shares in the semiconductor company Quantum-Si Inc. The transaction was ...</p>\n\n<a href=\"https://www.benzinga.com/markets/equities/23/07/33226459/cathie-woods-ark-invest-makes-major-quantum-si-purchase-loads-up-on-1-4m-shares-of-semiconductor\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"TER":"泰瑞达","QSI":"Quantum-Si Inc.","CDXS":"Codexis","SDGR":"Schrodinger Inc."},"source_url":"https://www.benzinga.com/markets/equities/23/07/33226459/cathie-woods-ark-invest-makes-major-quantum-si-purchase-loads-up-on-1-4m-shares-of-semiconductor","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1130744193","content_text":"Ark Invest, led by Cathie Wood, made some significant trades on Thursday. The most notable was the purchase of over 1.4 million shares in the semiconductor company Quantum-Si Inc. The transaction was valued at $3.7 million based on Thursday’s closing price of $2.58.The Quantum-Si TradeArk Invest has been consistently buying shares of Quantum-Si since its listing, with the latest purchase being the largest so far. Quantum-Si, a semiconductor company, has seen a steady rise in its stock price since its listing.Ark has deployed its healthcare-focused Ark Genomic Revolution ETF (ARKG) to buy the shares. Quantum-Si is targeting a $21 billion market and believes it has a scalable semiconductor chip that could expand to home testing sometime after the year 2024.Ark Invest also sold 73,100 shares, worth $977,347 — based on Thursday’s closing price of $13.37, of Kratos Defense & Security from its ARK Autonomous Technology & Robotics ETF (ARKQ) and ARK Space Exploration & Innovation ETF (ARKX).Other Key Trades:Ark Invest sold 131,922 shares of Codexis Inc through ARKGARKG also sold 2,842 shares of Schrodinger IncThe ARKQ ETF bought 7,712 shares of Teradyne Inc. ARKX picked up another 1,868 shares in the automatic test equipment manufacturer.","news_type":1},"isVote":1,"tweetType":1,"viewCount":210,"authorTweetTopStatus":1,"verified":2,"comments":[],"imageCount":0,"langContent":"EN","totalScore":0}],"lives":[]}