Palantir Technologies Inc. (NYSE:PLTR) is destroying the globe, and you’re concerned about one financial report? Palantir announced a loss of one cent per share rather than a minor profit of three cents per share. Many investors were dissatisfied with the announcement, and Palantir closed Monday’s session down roughly 14%. Palantir had also fallen by 8% by late Tuesday’s session.
Furthermore, Palantir Technologies’s stock is still down roughly 80% from its ATH, hovering around its IPO price from nearly two years ago. On the other hand, Palantir is a high-growth firm with a lengthy expansion runway. Furthermore, Palantir has significant earning potential and should become more profitable over time. Also, as a Palantir investor, I am more concerned with the 250% YoY rise in business client count in the United States than the one-cent loss.
Palantir is a monopolistic, high-growth firm with an impressively lengthy growth runway and enormous profit potential. Furthermore, Palantir has a substantial competitive advantage – the United States government. US government agencies prefer Palantir Technologies for a good cause. Before Palantir’s solutions, agency databases were “siloed,” requiring users to search individual databases. Palantir is now used to connect everything. For example, Palantir allows the FBI to obtain essential data from a police department without going through miles of red tape.
There is some uncertainty surrounding what Palantir performs and what distinguishes the company. Many market participants are excessively preoccupied with “counting pennies” rather than focusing on the future. Palantir’s software, in essence, merges diverse operational parts, allowing them to function easily and reliably. Palantir might also be considered the master of data and essential information, which is a tremendously valuable business in this day and age.
Furthermore, Palantir has worked closely with a number of government agencies for many years, contributing to the idea that Palantir Technologies is the most trustworthy corporation in its field. As a result, we continue to see commercial clients’ interest in Palantir’s solutions expand. Palantir had 39 business clients in the United States last year; now, it has 119. Furthermore, Palantir’s goods are highly sticky, with substantial switching costs. As a result, once a corporation has implemented Palantir’s software, it should become a long-term consumer of Palantir’s products and services.
Q2 – Better Than The Initial Reaction
We continue to experience strong revenue growth while the cost of revenue falls. Revenue climbed by 26% yearly, although revenue costs increased by just 12%. Gross profit was $370.8 million, up 30% year on year. As a result, we see Palantir Technologies becoming more profitable as it grows in size. This upward trend in profitability is positive and should continue, becoming more obvious as the company expands operations and revenues in the coming years.
Furthermore, we find a downward trend in operational expenses. Sales and marketing increased marginally, R&D decreased, while SG&A spending remained unchanged year on year. In general, operating costs decreased by 4% year on year. Furthermore, stock-based remuneration continues to fall, falling by more than 30% year on year. The adjusted operating margin was 23%. The adjusted gross margin for the quarter was around 80.8%, suggesting exceptional profitability and tremendous earnings potential.
Q2 – Remarkable Highlights
We achieved strong YoY revenue growth, with a 45% increase in the United States. Palantir’s commercial division is operating admirably, boosting revenues by 46%, with outperformance in the United States, where revenues increased by a stunning 120%. Furthermore, the number of commercial customers in the United States increased by 250% yearly, demonstrating great demand for Palantir’s goods and services and predicting significant future growth and widespread adoption of Palantir.
Palantir Could Achieve Widespread Adoption
We must remember that Palantir is still in its early stages of operations, growth, and profitability. Nonetheless, the organization provides the best products and services in its industry. Palantir Technologies would probably not be the contractor of choice for the US government, including the DOD, CIA, NSA, and other intelligence agencies, if it didn’t. Furthermore, if its competitors had the upper hand, Palantir would not be experiencing such phenomenal development in the corporate area.
Palantir also offers major competitive advantages, as we can see. As a result, we can conclude that Palantir has the potential to be widely adopted in the corporate sector.
Palantir Technologies is trading at roughly seven times forward sales expectations, and the P/S multiple may increase as the firm grows. Palantir has a long growth runway, with revenue growth of roughly 30% expected in the following years. For instance, Nvidia (NVDA) has slower growth predictions and trades at approximately 14 times next year’s sales estimates. In the electronics and software industries, valuations of ten times revenue or more are common.
Even Microsoft (MSFT), an established software company, trades at around nine times forecast revenues, making it more costly than Palantir. As a result, we believe Palantir Technologies is inexpensive and has the potential for significant growth as the company improves in the next years. As a result, if Palantir continues to increase revenues and improve profitability, its stock could reach the $40-$50 range within a few years.
Risks To Palantir
Despite my positive perspective on Palantir, market players should be aware of a number of potential hazards involved with this investment. While Palantir Technologies’ growth narrative is compelling, shares are not cheap by traditional measures. Furthermore, the company’s earnings are currently low and may not grow as much as I anticipate. Furthermore, the stock could fall if the company’s growth outlook shifts to be less favorable. For example, if Palantir loses favor with the government or suffers a data leak, the stock price might plummet significantly. Please carefully consider these and other risks before investing in Palantir Technologies.
Featured Image: Megapixl @Michaelvi
