Palantir Technologies Inc

Palantir Technologies Inc (NYSE: PLTR) is a software entity that provides enterprise data platforms for businesses dealing with complex and sensitive data. It serves organisations across private, public, and non-profit sectors.

Investment Highlights - Palantir Technologies Inc – Hold at USD 21.94

• Over the past two years (FY18 to FY20), revenue and gross profit have surged at a CAGR of ~35.47% and ~31.19%, respectively.
• PLTR had anticipated year-on-year revenue growth of more than 30% for FY21 and 45% for Q1 FY21.
• PLTR can be benefitted from the long-term perspective as more companies are implementing artificial intelligence technologies.
• The Company had signed 21 new contracts, each worth USD 5 million or more during Q4 FY20.

Key Risks

• Since its inception, the Company has generated a negative cash flow from operations.
• The Covid-19 pandemic can change the timing of billings, revenue recognition, and customer collections, which can affect liquidity.
• Volatility in the financial market could also impact the Company’s ability to raise external funds.

Recent Developments

On 20 April 2021, PLTR updated that it had renewed the strategic partnership with Ringier AG Moreover, PLTR would provide software to enhance the digital transformation and accelerate the progress of Ringier to become a digital-first global media company.

On 5 April 2021, Palantir signed a USD 89.9 million contract with the National Nuclear Security Administration for the duration of five years. This contract will strengthen the relationship of PLTR with the US government.

Financial Highlights (for FY20 ended on 31 December 2020 as of 16 February 2021)

(Source: Company Website)

• During FY20, revenue surged 47% year-on-year as the revenues from government customers increased by 77% against FY19.
• Due to the increase in the personnel cost, the cost of revenues also increased by 45% year-on-year during FY20.
• During FY20, the average revenue per customer remained USD 7.9 million, increased by 41% year-on-year.
• The Company’s software is presently leveraged across 40 industries, while 56% of FY20 revenue was generated from the government segment.

Share Price Chart (from 30 September 2020 to 19 April 2021)

(Source: Refinitiv, Thomson Reuters)

Conclusion

PLTR had delivered stellar growth in revenues and gross profit during FY20. The Group has now built two software platforms, Palantir Foundry and Palantir Gotham, which can handle complexities in the world. Moreover, the Company had signed 21 new contracts with Rio Tinto, PG&E, BP, U.S. Army, U.S. Air Force, FDA, and NHS during Q4 FY20. Furthermore, PLTR had anticipated year-on-year revenue growth of 45% and an adjusted operating margin of around 23% during Q1 FY21. Also, it had expected full-year revenue growth of more than 30% during FY21. The stock made a 52-week high and low of USD 45.00 and USD 8.90, respectively.

Based on its projected revenue growth for FY21, we have given a "Hold" stance on Palantir Technologies Inc at the closing market price of USD 21.94 (as of 19 April 2021), while we will keep track on the development of its key contracts and revisit our stance accordingly.

Disclaimer

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