Palantir Technologies Inc.

PLTR Details

Palantir Technologies Inc. (NYSE: PLTR) assists businesses in gaining insight and improving operational outcomes by helping them manage disparate data sources. PLTR makes money by offering software subscriptions with ongoing O&M services (Palantir Cloud), software subscriptions with ongoing O&M services in its clients' environments (On-Premises Software), and professional services. 

Latest News:

• New Partnerships: PLTR announced a new one-year extension of its agreement with Ferrari on February 10, 2022, to offer its world-class data and analytics technologies to Scuderia Ferrari. Ferrari will also continue to employ PLTR's Foundry platform to support data-driven performance decisions across the Power Unit. In addition, Satellogic Inc., a leader in sub-meter resolution satellite imagery collecting, announced a new cooperation with PLTR on February 1, 2022.

FY21 Results:

• Progress in Topline: Commercial customer count tripled to 147 clients YoY, resulting in a 41.11% rise in sales to USD 1.54 billion in FY21 (ended December 31, 2021) from USD 1.09 billion in FY20.
• Decline in Losses: PLTR witnessed a decrease in net losses to USD 520.38 million in FY21 from USD 1.17 billion in FY20.
• Robust Balance Sheet: The company's cash and cash equivalents were USD 2.52 billion as of December 31, 2021, with no outstanding debt.
• Adjusted Free Cash flow: PLTR reported an increase in adjusted free cash flow to USD 424.13 million in FY21, representing a free cash flow margin of 28%.

Key Risks:

• Customer Concentration Risk: The top three PLTR clients generated 25% and 28% of the company's sales in FY20 and FY19, respectively. If it doesn't keep or build client relationships or large consumers cut back on their purchases, its revenue could drop.

Outlook:

• Q1FY22 Estimates: As of February 17, 2022, PLTR expects revenues of roughly USD 443 million and an adjusted operating margin of around 22% in the Q1FY22,

• FY22 Estimates: PLTR expects 30% or greater annual revenue growth through 2025. It also predicts the adjusted operating margin to be around 27%.
  

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

The potential of aggressive rate hikes is terrible news for high-growth tech stocks since it would raise their capital expenses and reduce the value of their future earnings. PLTR's share price has fallen 51.28% in the past six months and is currently trading around the lower-band of the 52-week range of USD 11.75 to USD 30.19. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 14.79.

Meanwhile, the company's recent collaborations with Scuderia Ferrari and Satellogic (SATL) boost prospects for robust growth in the present quarter, bolstering the company's promise to another year of +30% revenue growth.

Considering the stock's significant correction in the past six months, recent collaboration, strong balance sheet, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the closing price of USD 11.77, down 15.75% as of February 17, 2022.

PLTR's 1-Year Technical Price Chart. (Source: REFINITIV, Analysis by Kalkine Group)

Technical Summary Analysis

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Altice USA, Inc.

ATUS Details

Altice USA, Inc. (NYSE: ATUS) provides broadband communications and video services in the United States. Its services are primarily marketed under two brands: Optimum in the New York metropolitan region and Suddenlink in the south-central United States. As of December 31, 2021, the company's fiber-rich hybrid-fibercoaxial (HFC) broadband network and fiber-to-the-home (FTTH) network covered 21 states and had approximately 9.3 million total passings.

Latest News:

• Acceleration in Fiber Deployment: ATUS announced an acceleration of its fiber deployment strategy across its Optimum and Suddenlink footprint over the following four years on February 16, 2022, to reach 6.5 million passings by the end of 2025. Its Optimum zone in the New York tri-state area has created a fiber broadband network, with 1.2 million fiber passings available for sale as of December 31, 2021. Construction of Suddenlink is slated to begin this year in Texas.
• Significant Capex Plans: In the latest earnings call, the company announced its capex target for 2022 is USD 1.7 to 1.8 billion, with USD 300 to 400 million in extra FTTH capex and USD 100 to 200 million in additional new-build capex.

FY21 Results:

• Slight Increase in Sales: The company reported a minor increase of 1.98% in revenues to USD 10.09 billion in FY21 (ended December 31, 2021) compared to USD 9.89 billion in FY20.
• Surge in Net Income: ATUS recorded a sharp uptick in net income to USD 1.01 billion in FY21 vs. USD 443.48 million in FY20.
• Leveraged Balance Sheet: As of December 31, 2021, the company had cash and cash equivalents of USD 195.71 million and total debt of USD 26.55 billion.
• Improvement in Penetration of FTTH Passings: According to the company, the penetration of FTTH total passing was 5.9% in FY21, up from 2.9% in FY20.

Key Risks:

• Customer Concentration Risk: ATUS purchases set-top boxes and other customer premise equipment from a small number of vendors since its cable systems use one or two proprietary technology designs. Any breach of contract by vendors could jeopardize the company's operations.

Outlook:

• FY22 Estimates: Ignoring capital expenditures linked with potential subsidized rural broadband construction, the company aims to boost investments in key growth initiatives, raising cash capex to about USD 1.7 to 1.8 billion.

Stock Recommendation:

ATUS' share price has fallen 56.90% in the past six months and made a new 52 week low today. It presently trades at an EV/EBITDA ratio of 8.5x, a forward P/E ratio of 7x, and a TTM free cash flow ratio of 4x. Compared to any other primary cable provider, ATUS is the most affordable by far.

Considering the correction in the stock price in the past twelve months, strong profitability margins, underutilized capex activity, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the current price of USD 11.61, down 19.38% as of February 17, 2022, 3:14 PM ET.

ATUS's 3-Year Technical Price Chart. (Source: REFINITIV, Analysis by Kalkine Group)

Technical Summary Analysis

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.