Palantir Technologies Inc. (PLTR) on Q1 2021 Results - Earnings Call Transcript
Operator: Welcome to Palantir’s Earnings Call. We will be discussing the results announced in our press release issued prior to today’s call and posted on our Investor Relations website. During the call, we will make statements regarding our business that may be considered forward-looking within applicable securities laws, including statements regarding our outlook for the current quarter and other future periods, management’s expectations about our future financial and operational performance and other statements regarding our plans, prospects and expectations. These statements are not promises or guarantees and are subject to risks and uncertainties, which could cause them to differ materially from actual results. Information concerning those risks is available in our earnings press release distributed prior to today’s call and in our SEC filings. Palantir undertakes no obligation to update forward-looking statements, except as required by law. Rodney Nelson: Thanks, Jacko. Joining me on today’s call are Shyam Sankar, Chief Operating Officer, Dave Glazer, Chief Financial Officer and Kevin Kawasaki, Global Head of Business Development Over the course of the call, we will refer to various growth rates when discussing our business. These rates reflect year-over-year comparisons unless otherwise stated. I'll turn the call over to Shyam to get us started. Shyam Sankar: Thank you, Rodney. Cutting-edge product and continued efficiencies and distribution drove exceptionally strong Q1 results. Adjusted free cash flow was $151 million, a 44% margin, and this was an increase of $441 million over the year ago quarter. Revenue was up 49%, billings grew 248%, RPO grew 129%. We had 76% growth in duration adjusted commercial deal value. We had an adjusted operating margin of 34%. And our US business across government and commercial continues to be on fire growing at 81%. These results and for that matter our future results wouldn't be possible without our relentless focus on product innovation. The area I'm most excited about is the development of Apollo for Edge AI. This was demonstrated at the Dugway Proving Grounds in Utah this past April, just last month. This is live now. We are pioneering approach that we call micro models. Just like micro services are the basis of modern software architectures, we believe that micro models are how you operationalize AI at scale for enduring advantage. There is no place, this is more true than in our US government work on some of the hardest and most important problems facing our nation. Apollo for Edge AI is the next evolution to transform AI into alpha, enabling customers to train, manage and deploy multiple independently versioned chained models to the Edge with ease. Customers will have maximum flexibility to decompose a task into multiple models, where each component can be improved and upgraded in isolation, and subsequently dynamically chained together even if links in that chain are running across multiple platforms from space to mud and across different sensors and shooters, making the sum of the parts greater than the whole. Dave Glazer: Thanks, Shyam. I'll now review our first quarter performance, followed by our outlook. Cutting edge product and increased efficiencies and distribution drove an exceptionally strong Q1 results. We generated revenue growth of 49%, bringing Q1 revenue to $341 million. Adjusted operating income increased to $117 million, representing a margin of 34%. And adjusted free cash flow increased to $151 million, representing a margin of 44% and a $441 million improvement from Q1 2020. This was backed by strong first quarter billings of $362 million, up 248% year-over-year. Looking at our revenue performance, our total first quarter revenue growth was 49%, ahead of our prior guidance of 45%. The combination of 49% revenue growth and 44% adjusted free cash flow margin is indicative of the unique underlying unit economics of our business. Our US business ended the first quarter with nearly $800 million annualized revenue run rate, as total first quarter US revenue increased 81%, representing 72% US commercial growth and 83% US government growth. Looking at revenue by segment, first quarter government revenue was $208 million, up 76%. US government revenue increased 83% year-over-year in the first quarter and international government revenue increased 57% year-over-year. We expect this momentum to continue, as we have a significant pipeline of government deals building in Q2 and beyond that we believe will fuel durable elevated growth in our government segment. First quarter commercial segment revenue totaled a $133 million, up 19% year-over-year, and we are seeing particular strength in the US, as US commercial revenue increased 72% year-over-year. In addition to that revenue growth, we're also seeing substantial increases in leads and new opportunities, and we've more than doubled the number of active pilots in our commercial business since February. A - Rodney Nelson: Great. Thanks, Dave. So we'll begin Q&A with questions from our 1.5 million shareholders submitted through se. And Shyam, I'll start with you on this first one. Avi, asks. Unidentified Analyst: Does the company intend to turn into profit in 2021 or to keep using the current resources to expand? Shyam Sankar: First of all, congrats Avi on having the most voted on question. There are two numbers that we focus on. The first is adjusted free cash flow, which really is the business' ability to generate money - generate cash. And the other is adjusted operating income, which is a measure of profitability, excluding stock-based comp primarily. On cash flow, we had a swing of $441 million to deposit, generating $151 million of positive cash flow, a 44% adjusted cash flow margin. So this shows the business underlying financial strength. And on operating income, we had a 34% margin. This is demonstrating a software company that is efficiently distributing its products and shows tons and tons of product leverage. Not to mention, we're one point shy of our long-term targets that we established around the time of the listing. So it really shows that we can hit that. And so if you look at these two things together, we're proving the profitability and cash generation potential of the business. Sometimes in software, people talk about the rule of 40. The sum of your adjusted free cash flow margin and sum of your revenue growth should be greater than 40, right. Well, for us, that's 49% revenue growth in Q1, 44% adjusted free cash flow margin. That's 93%. That puts us in incredibly rare site area. We're in the top three of software companies for Q1. But I think actually, the most important thing is to realize that we're just at the beginning. We only have a handful of Fortune 500 companies. We are just starting to move down market to medium-size enterprises. Our government revenue is less than 10 basis points, less a tenth of a percent of US defense spending. We have so much exciting product vision to invest in. There's just a huge market to go after. And the most prudent thing to do is to invest aggressively to go after. And that's what we're doing. We are focused on profitability. We're focused on growth. We're focused on generating in excess of $4 billion in revenue in 2025, as Alex outlined earlier this year. Rodney Nelson: Great. Thanks, Shyam. I'll stick with you on this next one. We've gotten a few questions around the announcement, the investments that we've announced. Unidentified Analyst: So Jackson K. asks, why is Palantir choosing to invest in companies such as Lilium and Sarcos Robotics? Can you speak to the motivation behind these decisions and if investors can anticipate future corresponding investments? How do you view risk, investment size and potential return? Shyam Sankar: Thanks Jackson for the question. As I mentioned throughout the call, we are relentlessly focused on increasing distribution. And here, we see a unique opportunity with ambitious companies to invest in both compelling management teams and compelling businesses and to partner with them on using our software from day zero. These are folks that are focused on winning. There is no entrenched IT bureaucracy that wants to build their own toy like solution. They viscerally understand the value of buying the best operating system for their enterprise, shaving years and mountains of risk off their road map. That's not even to make mention of all the money they would have otherwise wasted buying traditionally siloed systems from CRM to ERP to manufacturing execution systems to some homegrown mini monster. Overall, we think this is a really compelling opportunity to accelerate our business, to accelerate our distribution and to bet on our customers. Rodney Nelson: Great. And maybe one more for you, Shyam, before going to the rest of the group. Unidentified Analyst: Jeffrey T. asks, what are your plans to compete with Microsoft in the coming quarters? Shyam Sankar: Thanks Jeffrey. Well, we don't compete with Microsoft or other software vendors or system integrators. We compete against our customers. We compete against our customers' desire to build their own bespoke solution. This is build versus buy. And you aren't actually buying with Microsoft or these other vendors. I mean, with Microsoft, remember Ballmer's famous meme, developers, developers, developers, or with AWS, look at their product marketing, it's about build, build better, build faster, build on AWS. The same for GCP and with system integrators, by definition, you're building. And yes, that's a challenge because our software shamanism means that we build something radically in the future, holistic in approach and stunning in its results. But it's also something that comes across as both heterodox to the high priest of IT and their reference architecture. But the proof is in the pudding when the pandemic hit and tore through our health systems and supply chain, the IT orthodoxes failed to deliver anything ameliorate. Foundry and Gotham delivered revolutionary capabilities in jaw droopingly short periods of time. Our battle tested, and I mean, that literally, our battle-tested architecture is competing against DIY market. And the pace we are innovating at continues to put distance between us and the next best alternative from archetypes that allow you to replace a year of custom integration with a few clicks over a few hours to Apollo for Edge AI that allows you to deliver the most sophisticated operational AI that is frankly just a few steps shy of Skynet. And as I mentioned earlier, we see the cloud providers, in particular, starting to incorporate these battle-tested architectures into their go-to-market motion and their offerings to their customers, precisely because selling undifferentiated LEGO bots isn't enough. Rodney Nelson: Great. Thanks, Shyam. Kevin, I'll come to you with this next one. It's kind of in the similar vein. Unidentified Analyst: Donatas asks, do you see Palantir becoming as crucial and impactful as Microsoft Office for businesses? If so when do you expect to reach that kind of adoption? Kevin Kawasaki: Thanks for the question. People should expect more from the modern operating purpose. For our customers, particularly in a time of great need, we're the most crucial and the most impactful software for any type of business. Our users aren't just in the office. They're on the front line, on the factory floor, at an airport, doctor’s office, in a war zone. People use our product for their day-to-day job, their day-to-day mission. I think about a nursing home worker in Japan, who's caring for an aging population and needs to deliver preventative care. Workers at an airline routing thousands of flights or last year needing to find parking for thousands of aircraft. One of our customers is fighting wildfires in California, fire risk experts doing on the ground inspection with foundry. The United States and the United Kingdom governments are running two of the most successful vaccination programs in the world, and both are using foundry. In the UK thousands of users from physicians to administrators, nearly 2,500 vaccination sites, nearly 44 million vaccines. And every vaccine is ordered, allocated, tracked and delivered in foundry. In the United States, 257 million vaccines over 1,600 data sets, 50 states, 14 jurisdictions, pharmacies, manufacturers, foundry is the place for the federal government to understand vaccine supply and distribution chain from manufacturing to the jabs. Our products help our customers win, which is what is required of the modern operating system. Rodney Nelson: Thanks, Kevin. Shyam, I'll come back to you on this next one. Unidentified Analyst: Johan asks, your recent partnership with Faurecia, and the one before with Airbus shows your ability to work with that manufacturing clients. Is there any plan to develop that sector even further? Shyam Sankar: Thank you, Johan. Absolutely, manufacturing is a huge focus for us and it's an area of deep, deep strength historically. Just look at Chrysler. Every factory in North America on the factory floor, you will find foundry open to manage quality in real time. Manufacturing with chemical companies, mining, energy, suppliers across ecosystems in automotive, aerospace, I'll announce a new customer, auto manufacturing with Fuzhou. We have cutting-edge products and archetypes that deliver rapid value in managing working capital, procurement, production, demand forecast, supply chain management, quality, logistics, all the whole chain around manufacturing. And I call out companies like Lilium and Sarcos again that are going to build their operations around foundry from day 0, using foundry for ERP, CRM, manufacturing execution, for quality and much more. And our value here extends beyond manufacturing into sales and after sales, turning IoT and telemetry data into real value, not only for the OEMs, for the manufacturers, but for their suppliers and their customers. Rodney Nelson: Great. Dave, I'll come to you on this next question. We've gotten a few on these lines. Unidentified Analyst: Brian L asks, could you ever see Palantir having Bitcoin or any other type of cryptocurrency on its balance sheet? Dave Glazer: Brian, thanks for the question. The short answer is yes. We're thinking about it, and we've even discussed it internally. Take a look at our balance sheet, $2.3 billion in cash at quarter end, including $151 million in adjusted free cash flow in Q1. So it's definitely on the table from a treasury perspective as well as other investments as we look across our business and beyond. On the other side of that, in terms of accepting Bitcoin from our customers, we do accept it. That's more convenient. We're open for business there. Rodney Nelson: Great. Thanks, Dave. Shyam, coming back to your question about our work in healthcare. Unidentified Analyst: Conrad asks, does foundry have presence in early stage drug discovery and compound identification, not clinical trial data, but molecular properties, especially as pharma moves from small molecules to biologics? Shyam Sankar: Thanks, Conrad. Yeah, our life science work is growing very quickly, and we are absolutely working on the drug discovery end of it. I'd highlight our work with NCI, the National Cancer Institute, and the National Center for Advancing Translational Sciences at NIH, where we are doing lots of preclinical work. A small sliver, which was actually made public through published papers were Palantir and Palantirians are listed at. You can check out some of these from past ASCOs. Our work with MD Anderson spans not only obviously, clinical, but also preclinical work that we're doing, but more head on directly to just drug discovery. I'm proud to announce new partnerships with Roivant Sciences where we will work across their portfolio on drug discovery and development. And if you know anything about Roivant, they've invested a lot in computational approaches to drug discovery. With Celularity, we're going to help accelerate science around their breakthrough cell-based therapies and their cutting-edge biotechs that's focused on translating condensate biology into medicine. Rodney Nelson: Great. Thanks, Shyam. Kevin, I'll come to you on this next one, a question about the go to market. Unidentified Analyst: Jackson K asks, how is Palantir planning to expand downstream to medium-sized businesses? Since demo day and the kick-off of Double Click, has Palantir seen an increase in the interest from smaller companies? And if not, how can Palantir better demonstrate value to these businesses? Kevin Kawasaki: I mean, short answer is yes, we signed up a number of great small and medium-sized businesses recently. And I expect to see more of this because we're widening our distribution. A big driver of our Q1 results, that's 72% commercial growth in the United States and what's contributing to the revenue guide for Q2 is our increasing efficiencies of distribution. Our sales cycle is beating up. On demo day and Double Click, demonstrating our product publicly generates interest from all over, large global multinationals tuning in across their vast organization, smaller local regional companies are turning in to - tuning in to learn how foundry can provide an edge for their business, too. And this generates activity. We mentioned that our qualified pipeline has increased by two and a half times in the US and UK. And active commercial pilots across the business have more than doubled. And I think one of the most exciting things is that our shareholders are showing up in customer meetings. Of the 1.5 million individual shareholders, some are calling so they could bring foundry to their day to day job. Rodney Nelson: Great. Kevin, I'll stick with you as next question is in the similar vein. Unidentified Analyst: Christopher T. asks, with the recent announcement that Palantir is going to offer software to companies for free, how is Palantir getting this information out to Fortune 500 companies? Is Palantir reaching out to individual companies or are they waiting for - are we waiting for companies to come to us? Kevin Kawasaki: Thanks for this question. I suppose this is this is an opportunity to get the information out there. Over this last year, many of the most successful responses to the pandemic relied on effective data access through foundry. The purpose of Palantir unlock is to make foundry available to those who need it. I can remember about a year ago, when we were at the beginning stages of COVID-19, we knew that Palantir can make a huge impact, but we needed to help people learn this. So we began calling and calling and called city, state, local government, hospital, university research centers just to let them know that we have a technology that could help. I remember dialing into a state government. And finally, after several calls, finding the one person who's essentially trying to bring together data for the entire state with nothing more than a spreadsheet and a white board. Sitting in a war room, she was trying to figure out answers to critical question. How many hospital beds do we have? How long until we run out? How many ventilators? How long will they last? How do I get PPE to my health workers? And we're proud to say that this person had the power of foundry within hours and that is what we're offering here with unlock. Rodney Nelson: Great. So Shyam, on to next question, zooming out a little bit. Unidentified Analyst: Jose asks, what is Palantir's long-term identity, both be a data and AI company or will it try to be the leader in many parts of the tech industry? Shyam Sankar: Thanks, Jose. Well, we aspire to be the most important software company in the world. And some would say that we're well on our way. We help countries deter and respond to threats from totalitarian regime. We help prevent terrorism from destroying our way of life. We enhanced the protection of data, private ship and civil liberty to prevent the reaction to terrorism from destroying our way of life. We help governments manage public health. And broadly, we have helped organizations respond to the various shocks that would otherwise have been death-row. And we do this with completely unique software. Foundry is an operating system for the modern enterprise, Gotham as defense OS, these are generational shifts in capabilities and approach. Personal computing was stuck in time before the standardization of the right operating systems. Similarly, enterprises are stuck in our site without the right modern enterprise operating business. They are either drowning in the collection of siloed applications or they're just being sold a bunch of LEGO bots and a do-it-yourself dream. Personal computer hobby has tried to make their own operating systems too. We know how well that worked out. Alex sometimes said that we are software shaman. We have this track record of seeing around the corner and building what the world needs before the need is obvious. And the ability to even have perceived the need feels mystical, and its precedent when it meets the moment. And you're going to see this again with Apollo for Edge AI. Rodney Nelson: Great. Dave, I'll come to you with this next one. Unidentified Analyst: Louis asks, can you expand on Palantir's stock-based compensation will have further dilute the total shares of the company by increasing float each quarter and how much longer will significantly impact EPS? Dave Glazer: Thanks, Louis. We have very low dilution when looking at a fully diluted share count. So far this year, our share -- fully diluted share count has increased less than two-tenths of a percent so really, really low. With respect to SBC, it will normalize over the next couple of years as we're working through this outstanding overhang. And at the same time, when you couple that with the topline growth, we're going to continue to make progress toward profitability. Shyam Sankar: I would just add that. Obviously, everything Dave said is right here. The 20 basis point shows the discipline with which we are managing dilution. But just to zoom us out for a second here, like, why do we have stock-based comp in the first place. Equity is the fundamental investor employee alignment. We want, and frankly, you should want employees working their asses off with a long-term orientation to grow the value of the company. And so yes, we plan to continue granting equity to our employees and providing them opportunities to share a meaningful upside in the company in order to maximize your shareholder value. Rodney Nelson: Great. Dave, I'll stick with you. Unidentified Analyst: Jason B. asks, why does Pop Karp keep selling its shares? Dave Glazer: Jason, thanks for the question, and nice Pop Karp reference. We'll call him Alex here. So first off, Alex is one of our largest stockholders, but he has two large option grants that are expiring at the end of December that can't be extended. And so when he goes and exercises these options, it's going to create a very, very large stock build just to exercise in holding shares. And as a result, we've seen tax motivated sales as well as many corresponding exercises for shares that he will continue to hold. And even after this, he'll continue to be one of our largest stockholders. If you're interested in the nitty-gritty, you can check our filings if you want more detail. Rodney Nelson: Great. Shyam, I'll come to you with this next one before we open up the call. Unidentified Analyst: Emil asks, experience of Palantir software appears more often now on job postings. Would you consider creating courses or tutorials on how to use your software, access to of course we've given incentive for the employees to request the software for their companies. Could you comment on that? Shyam Sankar: Thanks, Emil. Indeed, the number of job postings for roles that require contract experience, they're growing every day, and that has really accelerated. Now that we have 15 large system integrators who are hiring, training and building practices around foundry, and we've built robust training to enable these system integrators to build billion-dollar lines of businesses around foundry. But to your question, we want to do even more here, especially work in help with restarting economies and returning to full employment. So we're planning to make foundry training available free to veterans of U.S. and allied militaries, to all of our individual shareholders and to anyone who is unemployed in the markets that we operate in. We are really excited about this. And we hope that it will make a meaningful contribution to restarting and reopening. So stay tuned for more details around this in the coming weeks. Rodney Nelson: Great. Operator, we'll open up the call for Q&A. Operator: Your first question comes from Chris Merwin from Goldman Sachs. Your line is open. Chris Merwin: All right. Thanks for taking my question and congrats on the quarter here. I wanted to ask about the commercial business. It looks like growth improved from last quarter, still below 20%. But I know there's a lot that you've been working on there, including the modularization of foundry and wanted to hear how that was resonating with customers. And then just the second part of the question would be around the customer add. It looks like you added 11 new customers on the commercial side in the quarter. Did most of this come from IBM or are those through your direct sales force? Thanks. Kevin Kawasaki: Great. Thanks, Chris. Yeah, the commercial business is gaining more and more momentum. As we mentioned, it grew 72% in the US. So what we're seeing is where economies are opening, there's just incredible traction there. We've hired 50 sales folks in the last quarter. You're starting to see that translate through in terms of activity two and a half times the number of qualified opportunities in the US and the UK, double the number of commercial pilots, the product investments that we've made around modularization and archetypes, those are what are translating also into increased activity. It's what's fueling our ability to do substantially more pilots here. The channel strategy is also helping us source more customers. The IBM partnership generated its first deal within 16 days of being launched there. So lots of momentum there, a place that we'll continue investing in. Overall, we're quite excited. We continue to win deals in Europe. Pharencia, Lilium in Europe, Fuzhou, Engi, so a bunch of momentum there. And as Europe starts to open and manage through the pandemic, we're also expecting the same sort of tailwind that we've seen in the US, in Europe. Chris Merwin: Thanks so much. Operator: And your next question will come from Parvi Provokzian from Jefferies. Your line is open. Brent Thill: Hey, thanks. It's Brent Thill at Jefferies. On the government business, there's a lot of questions about the sustainable strength post-COVID. And what you're seeing, I think you said in the past that COVID has opened the door to many conversations, but there's a considerable amount of long tail of that. If you could just talk to what you're seeing as you look out? Thank you. Shyam Sankar: Thanks, Brent. That's absolutely right. There are a lot of things that got started as a result of COVID, but many of those things were not related to COVID response per se. It's really the fact that something had to be delivered, and it had to work in days, it showed many of the customers where their bespoke, custom-build approach was just never going to get there and allow them to mark-to-market whether a faster buy solution was going to work. And so we've seen that across the business, of course, the work with the National Nuclear Security Administration is not directly COVID related at all, but it's certainly accelerated by this. We've seen work across healthcare, DoD, civilian agencies, accelerate inside the US and outside of the US. We've also seen that the pipeline is continuing to build there. We're expecting a lot of defense-related activity to build over the back half of the year and into next year. We participate in the global information dominance experiment with 11 combat command, that was not even visible during the contact that we build here. So quite excited about the pace at which these things are building. And if you think about Apollo for Edge AI, most of the capabilities we're looking at, they didn't even exist around the time of the listing, like the pace at which we are innovating on the product is probably one of the most exciting things and that is what is creating these opportunities that are compounding. Operator: Your next question comes from Keith Weiss from Morgan Stanley. Your line is open. Keith Weiss: Excellent. Thank you guys for taking the question and very nice quarter, especially with those new commercial customer adds. I had a question on kind of the margin side of the equation. And how we should be thinking about expense growth throughout the remainder of the year. So maybe to you, David. You did close to over $150 million of free cash flow in Q1. You're guiding for that figure for the full year. How should we use that to sort of guide our expectations on how that OpEx cost brand throughout the year? And how should we think about that on a go-forward basis? What's the investment philosophy if you will behind Palantir over the next couple of years as you look to sustain that 30% plus growth? Dave Glazer: Absolutely, absolutely. So as you noted, we had a very strong quarter, 49% revenue growth, 44% adjusted free cash flow margin and 34% adjusted operating margin. There's nothing noteworthy to call out on the expense side. Top line being obviously a contributor there. Overall, super pleased with the results. It shows the underlying unit economics. Let's look ahead to Q2, very strong revenue guide of 43% growth, coupled out with 23% operating margin, while at the same time, we're really going to be investing into the business, investing in sales hires, investments around the sales team, continued investment in the product and R&D, a lot of what Shyam talked about. And we're going to be focused on reopening. We think it's really important to get the company back in the offices to get people together and focus on culture. Operator: And your next question will come from Alex Zukin from Wolfe. Your line is open. Alex Zukin: Hey, guys. Thank you for the question. I wanted to ask clearly, the confidence in the commercial revenue growth is high given the rep hiring that you guys are putting up. Can you talk about the divergence in pilots in the commercial sector versus the stated revenue growth? And when will those pilots convert to revenues? How visible is that conversion time line, et cetera? Kevin Kawasaki: Yes. We're quite excited by the teeth at which our hires are being accomplished, the ramp that we're seeing for those tires. We're also seeing just a kind of aggregate flywheel acceleration where the ramps are getting faster, the activity, converting into revenue is getting faster. So generally I would agree like we are feeling very bullish, and we're seeing that there. The pilots themselves are compressing in terms of how long they're taking because of the investments made in product modularization, archetypes, these allow us to structure the products in a way that something that would have taken three months to four is now a week or less. This is giving us a lot more capacity to cost efficiently distribute the product, accomplish these pilots and turn the revenue crank here. And so we're seeing very high returns to the sales force we're building. We want to keep doing more here. Look for that to accelerate even further in the back half of the year. And the conversion, we're really happy with it. I think when I just think about the two and a half x qualified pipeline that's been created since February 1, and then I think about the doubling of the pilot we're seeing about a third of those have already turned into something. And so as we build bigger and bigger pipeline here, we're feeling good about how that funnel is flowing through. And if you combine that with the additional product investments, the road map that we're executing on, we have every reason to believe that we're going to continue to see acceleration across all these dimensions. Operator: This brings us to the end of our audio Q&A session. I turn the call back over for closing remarks. Rodney Nelson: Thank you all for joining us. We're excited about the quarter. Thank you for waking up early. We'll talk to you all soon. Operator: Thank you, everyone. This will conclude today’s conference call. You may now disconnect.
BofA Raises Palantir Price Target to $75 Amid Accelerated Growth
BofA Securities analysts increased their price target for Palantir Technologies (NYSE:PLTR) from $55 to $75, maintaining their Buy rating. The upgrade reflects expectations of accelerated growth in the U.S. and a strengthening competitive position.
Palantir’s penetration in both government and commercial sectors was described as being in the early stages, with expanding use cases and enhanced interoperability driving further adoption and upselling opportunities. The analysts highlighted the company’s ability to operationalize generative AI through its complex Ontology, addressing challenges in security, governance, and data robustness. This positions Palantir as a key player in enabling businesses to enhance margins through software and AI rather than relying solely on fixed asset scale.
Software has become increasingly critical in industrial production, representing 17% of U.S. nonresidential private fixed investments in 2023, compared to 11% in 2005. This trend supports Palantir’s long-term growth prospects as organizations prioritize automation, real-time data analysis, and process control.
BofA also raised its three-year commercial growth forecast for Palantir to 34% from 32%, citing the company’s expanding commercial customer base, partnerships, and distribution channels.
Palantir Soars 13% After Boosting Full-Year Forecast Amid Surging AI Demand
Palantir Technologies (NYSE:PLTR) raised its full-year outlook following a stellar third-quarter performance fueled by a wave of new AI-driven business. The company’s stock surged over 13% in pre-market today.
For the quarter, Palantir reported adjusted earnings of $0.10 per share, beating Wall Street analyst expectations of $0.09. Revenue climbed 30% year-over-year to reach $725.5 million, surpassing the projected $703.4 million. The robust results were propelled by a 39% increase in customer count, as demand for AI solutions continued to accelerate.
The company’s momentum has led it to raise its full-year revenue guidance to a range of $2.805 billion to $2.809 billion, up from its previous range of $2.742 billion to $2.750 billion. For the fourth quarter, Palantir projected revenue between $767 million and $771 million, well above the consensus estimates of $742.3 million.
Bank of America Raises Palantir Price Target to $50, Sees Stock Poised for Significant Growth
Bank of America raised its price target for Palantir (NYSE:PLTR) to a Street-high of $50 per share, up from $30, reaffirming its Buy rating on the stock. The bank sees Palantir’s recent inclusion in the S&P 500 as a pivotal moment, prompting institutional investors to reassess the company's long-term growth potential, which has been widely underestimated.
Comparing Palantir’s current trajectory to the early days of mobile phones, Bank of America suggests that, just as the mobile revolution led to trillion-dollar companies, Palantir is similarly positioned for massive expansion. The analysts highlight Palantir's technological strengths, particularly its "Ontology" platform, which integrates data and automation for enhanced decision-making. This, they argue, makes Palantir a crucial player in the evolving landscape of machine learning, AI, and quantum computing.
What distinguishes Palantir, according to the note, is its unique sales strategy. Engineers collaborate directly with clients to develop tailored solutions, creating deeper, more valuable relationships and boosting the company’s pricing power. The bank also points to Palantir's 35% operating profit margin as evidence of this approach’s success in the competitive software market.
Overall, Bank of America believes Palantir's business model and technological prowess position it for substantial growth in the coming years.
Palantir Technologies Inc. (NYSE:PLTR) and Its Strategic Growth Insights
- Palantir's partnership with Microsoft could significantly impact its growth in the government sector.
- The company's high price-to-earnings (P/E) ratio of 176.96 and price-to-sales (P/S) ratio of 27.72 indicate market optimism about its future growth prospects.
- Palantir demonstrates strong liquidity with a current ratio of 5.92 and operates with minimal debt, having a debt-to-equity (D/E) ratio of 0.06.
Palantir Technologies Inc. (NYSE:PLTR) is a company that specializes in big data analytics, providing software and services that help organizations analyze large amounts of information to make better decisions. It operates primarily in two sectors: government and commercial. Palantir's partnership with Microsoft aims to push the boundaries of artificial intelligence (AI) applications within government agencies, a move that could significantly impact its growth in this sector. This collaboration is particularly noteworthy as Palantir's government business has been growing at a slower pace compared to its commercial operations.
The financial metrics of Palantir reveal a company that the market values highly despite its earnings. With a price-to-earnings (P/E) ratio of 176.96, investors are showing a willingness to pay a premium for Palantir's shares relative to its earnings. This high P/E ratio could be indicative of the market's optimism about Palantir's future growth prospects, especially in light of its strategic initiatives like the partnership with Microsoft.
Moreover, Palantir's price-to-sales (P/S) ratio of 27.72 and its enterprise value to sales (EV/Sales) ratio of 27.62 further underscore the market's high valuation of the company's sales. These ratios suggest that investors value each dollar of Palantir's sales at a premium, likely due to the unique technology and services it offers, as well as its potential for expansion in both the government and commercial sectors.
The company's financial health is also reflected in its liquidity and debt management. With a current ratio of 5.92, Palantir demonstrates a strong ability to meet its short-term obligations, indicating a solid liquidity position. Additionally, a debt-to-equity (D/E) ratio of 0.06 shows that Palantir operates with minimal debt, which is a positive sign for investors concerned about financial stability.
In summary, Palantir's partnership with Microsoft could be a pivotal move for its growth in the government sector, despite the current slower pace of expansion in this area compared to its commercial business. The company's financial metrics, including its high valuation ratios and strong liquidity position, reflect the market's optimism about its future. These factors combined suggest that Palantir is well-positioned to leverage its technological capabilities and strategic partnerships for further growth.
Mizuho Raises Palantir Price Target to $24 but Maintains Underperform Rating Despite Strong Q2
Mizuho increased the price target for Palantir Technologies Inc. (NYSE:PLTR) from $22.00 to $24.00, while maintaining an Underperform rating, after the company posted better-than-expected Q2 results, resulting in a stock price surge of more than 13% intra-day today.
The analysts acknowledged that Palantir delivered a strong quarter that exceeded expectations, driven by 27% revenue growth and significant large-deal momentum.
Despite this positive performance, the analysts expressed continued caution, noting that Palantir's stock is now trading at 19-20 times its estimated revenue for calendar year 2025, based on low- to mid-20s expected growth. They emphasized the need for Palantir to consistently demonstrate stronger execution and growth to justify a significantly higher valuation. Due to the inherent unpredictability of Palantir's business, the analysts believe this will be challenging.
As a result, while acknowledging the upward revision of numbers, the analysts reiterated their Underperform rating.
Palantir Technologies Inc. (NYSE:PLTR) Earnings Report Analysis
- Revenue and Net Income: Palantir reported a revenue of $678.13 million and a net income of $134.13 million, indicating a healthy profit margin.
- Gross Profit and Cost Management: With a gross profit of approximately $549.57 million, Palantir demonstrates efficient cost management and financial stability.
- Operational Efficiency: Operating income and EBITDA figures of $105.34 million and $113.4 million respectively, showcase Palantir's operational efficiency and profitability.
Palantir Technologies Inc. (NYSE:PLTR) has been capturing the attention of investors and analysts alike, especially after its recent earnings report. As a company specializing in big data analytics, Palantir plays a crucial role in processing and analyzing large sets of data for both government and commercial clients. This unique positioning in the tech sector, combined with its innovative approach to data analysis, sets Palantir apart from its competitors. The optimism surrounding Palantir, as highlighted by The Motley Fool, stems from its financial performance and the potential for future growth.
In its latest quarterly financials, Palantir reported a revenue of $678.13 million, which is a significant figure that showcases the company's ability to generate income from its operations. This revenue, coupled with a net income of $134.13 million, indicates a healthy profit margin. Such financial health is a key factor that contributes to the optimistic sentiment among investors, supporting the belief that Palantir is on a trajectory for further growth and value creation.
Moreover, Palantir's gross profit of approximately $549.57 million further reinforces the company's financial stability. A gross profit at this level suggests that Palantir is efficiently managing its cost of revenue, which stood at about $128.56 million. Efficient cost management is crucial for maintaining profitability, especially in the competitive tech sector where innovation and investment are continuous.
The operating income and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) figures, at $105.34 million and $113.4 million respectively, provide insights into the company's operational efficiency. These metrics indicate that Palantir is not only generating significant income but is also managing its operational costs effectively, leading to a healthy bottom line. The earnings per share (EPS) of $0.0601, although modest, is a positive sign for investors, as it reflects the company's profitability on a per-share basis.
Finally, the income before tax of $140.76 million, after accounting for an income tax expense of approximately $5.19 million, highlights Palantir's financial strength. This financial performance is a testament to Palantir's robust business model and operational efficiency, laying the groundwork for the optimistic outlook shared by investors and analysts. As Palantir continues to innovate and expand its client base, the sentiment that "the best is yet to come" for the company seems well-founded.
Palantir Technologies Faces Modest Downside According to Mizuho Securities
On Tuesday, May 7, 2024, Gregg Moskowitz of Mizuho Securities set a price target of $21 for Palantir Technologies (PLTR:NYSE), slightly below its trading price at the time, which was approximately $21.60. This target, as reported by Benzinga, suggests a modest downside from the current level, reflecting a cautious outlook on the stock's future performance. The setting of this price target came in the wake of Palantir's first-quarter earnings announcement, which, despite showing strong financial results, did not prevent a decline in the stock's price.
Palantir Exceeds Q1 Expectations
Palantir Technologies Inc. (PLTR) reported first-quarter earnings that met and even surpassed analysts' expectations. The company achieved an earnings per share (EPS) of $0.08, aligning with estimates, and generated revenue of $643 million, exceeding the forecasted $614.88 million. This performance indicates a solid operational standing, as highlighted by the Schwab Network. However, despite these positive results, PLTR's stock experienced a downturn, shedding light on the market's reaction to more than just earnings figures.
Market Reaction and Investment Opportunities
The decline in PLTR's stock price, as noted by Seeking Alpha, was seen as a potential buying opportunity for long-term investors. This perspective is based on the company's ability to exceed top-line expectations and raise its full-year guidance, suggesting confidence in its future growth trajectory. Palantir's Advanced Information Processing (AIP) technology continues to attract new customers, bolstering its market position. Despite a 10% drop in its stock price, the company's fundamentals and growth prospects remain strong, presenting an attractive entry point for investors looking to capitalize on the current dip.
Palantir's Financial Highlights and Market Position
Moreover, Palantir's stock price fell to $21.55, a significant decrease from its previous close, despite outperforming first-quarter earnings and revenue expectations. The company reported a Q1 revenue of $634 million, surpassing the anticipated $615 million, and an adjusted EPS of 8.0 cents, slightly above the expected 7.9 cents. Additionally, its adjusted EBITDA of $234 million exceeded forecasts by a considerable margin. This paradoxical market reaction could be attributed to the management's cautious outlook, possibly due to uncertainties in the fiscal year's first quarter. Despite this, Palantir maintains an ambitious annual growth target of 25%, underscoring its confidence in its business model and future prospects.
Currently, PLTR is trading at $21.505, reflecting a decrease of approximately 14.7% from its previous levels. This fluctuation in stock price, ranging from a low of $21.35 to a high of $22.7 during the trading day, showcases the volatility and investor sentiment surrounding the stock. With a market capitalization of around $45.82 billion and a significant trading volume, Palantir remains a key player in the data analytics sector, navigating through market uncertainties with a focus on long-term growth and technological advancement.
