Summary
Palantir continues to aggressively grow its sales while at the same time it’s decreasing its total losses.
There’s also an indication that the stock dilution will significantly decrease in the foreseeable future, as stock-based compensation expenses were at the lowest levels in Q3.
As Palantir is on track to grow its business by 40% Y/Y in FY21, it appears that it’s only a matter of time before its stock appreciates.
Andreas Rentz/Getty Images Entertainment It’s been slightly more than a year since Palantir ( PLTR ) executed a direct listing and became a public company that’s trading on NYSE. Since that time its stock increased by over 100%, its business started to scale at an aggressive rate, and the company beat earnings estimates five quarters in a row. The latest earnings results show that Palantir continues to aggressively expand within industries, it’s on track to achieve its goal of growing annually by at least 30% in the following years, and the decrease in insider selling along with the expansion of the addressable market should help its shares to appreciate in the long run. There’s Growth All Across The Board
Palantir’s successful performance in Q3 once again disappointed those who were saying that the company is unable to scale its operations and is too exposed to a small circle of clients that generate most of its revenues. From June to September alone, the company managed to increase its revenues by 35.5% Y/Y to $392 million, above the estimates by $5.54 million, while its GAAP EPS of -$0.05 was above the estimates by $0.02. In addition, Palantir has also managed to increase its operating margin to 30%, above the expectations of 22%, and has signed 54 new deals each of which is valued at over $1 million. At the same time, the company increased the number of its customers to 203, up from 139 customers at the end of 2020. While the number of customers might appear to be small, high-value contracts that each customer signs with Palantir compensate for that.
The latest report also showed that governmental contracts continue to generate the majority of revenues, which increased by 34% Y/Y to $218 million in the recent quarter. There’s also every reason to believe that Palantir will be able to continue to generate substantial sums of money from government contracts as the company has close connections and long-term deals with major branches of the United States military such as the Navy, Air Force, and Army. As China expands investments into AI and big data analytics to counter the influence of Western nations across the globe and become a superpower of its own, the United States government is likely going to be more reliant on Palantir in the foreseeable future to tackle any foreign threat in the cyberspace. That’s why the company has already become one of the major beneficiaries of the $823 million data fabric IDIQ contract, which the U.S. Army awarded last month.
On top of that, the Department of Defense already plans to spend more resources on cyber security programs, which is also an upside for Palantir due to its close connection with the government along with a proprietary Gotham platform, the goal of which is to analyze complex sets of data and help organizations to improve their decision-making process. Therefore, as the Department of Defense is forecasted to spend over $900 billion annually by the end of this decade on its programs, up from $714 billion in 2020, Palantir will be able to benefit from this. Total Addressable Market Continues To Expand
In the past, Palantir’s sales from the commercial sector were lagging in comparison to governmental revenues. However, it made sense for the commercial business to generate fewer revenues, as governmental contracts were the focus of Palantir for years. While the Gotham platform was released in 2008, the Foundry platform was released only years later, but is already showing great results and gives Palantir a competitive edge against its peers. The biggest advantage of Palantir at this stage is that its custom-developed and hard-to-replicate solutions are making it easier for big businesses to navigate through the labyrinth of data and make impactful decisions based on the organized data. By doing so, those solutions also help Palantir to have a high retention rate, and the latest results clearly show that more private organizations are now interested in what the company has to offer.
In Q3 alone, Palantir’s total commercial revenue was up 37% Q/Q to $174 million, while […]
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