outline
Generative AI is the trend. It can answer questions quickly or create tables or pictures. The number of people using this to study English has also increased significantly. But in fact, what we wanted to do through AI was not conversation or English study. The reason we were excited about the emergence of AlphaGo in 2016 was not because it developed powerful Go software. This is because it was believed that intelligence surpassing that of humanity would solve many problems, including our technological limitations.
Now is the time to move beyond generative AI and actively utilize AI in more specialized areas. Palantir is an AI platform service company that learns corporate and government data and helps with maintenance and management.
In this article, we will learn about Palantir.
Company Introduction
Palantir Overview
Palantir was founded by PayPal founder Peter Thiel after he sold the company to eBay, along with Stanford computer engineering graduates Joe Lonsdale (co-founder), Stephen Cohen (VP), and former PayPal engineer Nathan Gettings (CEO).
Palantir's initial technology is known to have originated from PayPal's financial fraud prevention system, FDS (Fraud Detection System).
In short, we started with IT expertise and solid financial resources.
The main source of revenue is the public information analysis field. The application provided by Palantir provides a variety of tools to manage, process, and view large amounts of data, helping users make efficient decision-making processes.
It also received an investment of $2 million from In-Q-Tel, an affiliate of the U.S. CIA, and investment and collaboration are already underway with the CIA, Department of Defense, and FBI.
Palantir main product lineup
Palantir's main product lines are as follows.
-Gotham: This is an application that prevents and manages large-scale crimes such as the underground economy such as human trafficking, gun trafficking, drug trafficking, counter-terrorism, and financial fraud. As can be seen from the contents, it is mainly provided to the government.
-Foundry: An application that integrates and visualizes enormous in-house data such as finance, human resources, logistics, and inventory. It is mainly used for corporate purposes.
-Apollo: This is a SaaS platform for maintaining the two products above. The focus is on performance optimization and management of Gotham and Foundry.
-AIP(AI Platform): This is an in-house version of generative AI. Provides AI-based services by learning and inferring in-house data. Palantir is the most decisive product line in the AI theme.
Why you should invest in Palantir
Already strong financial structure
Even though it is an emerging AI company, it is not easy to find a profitable one. In most cases, deficits are supported by huge investments rather than profits. However, Palantir boasts overwhelming stability that is comparable to that of big tech, let alone its peer groups AutoDesk or DataDog.
Company NamePalantirAutodeskAtlassianDatadogMicrosoftAlphabetMataTickerPLTRADSKTEAMD DOGMSFTGOOGMETAMarket capitalization55.32B55.34B53.89B41.02B3.08T1.74T1.26THoldings Cash3.67B2.25B1.64B2.58B80.98B110.92B65.40BTotal liabilities229.39M2.63B1.27B902.34M111.36B29.87B37.92BNet Debt-3.44B146.00M-366.53M-1.68B30.38B-81.05B-27.48BDebt ratio6.44%141.56%140.44%44.55%46.74%10.54%24.76%Palantir peer group market cap and debt ratio (Source: Seeking Alpha, Yahoo Finance)
It seems that there is no need to worry about stability being undermined due to huge deficits. In a February letter to shareholders, Palantir's CEO noted that "2023 will be the company's first profitable year with net income reaching $210 million" and that "demand is too much to handle."
Overwhelming growth
Palantir's EPS growth rate (FWD) is 87%, significantly exceeding the sector median of 6.88%. Although the company does not present long-term goals beyond 2025, judging from Big Tech's past history, it is expected to continue to grow at a rate of more than 20% over the next 10 years.
This is not a simple expectation placed on a promising tech company. As the CEO said, “It’s unbearable,” demand for Palantir products is expected to be enormous in the future.
Started launching AIP for military operations last year, LLM was installed on Palantir's existing big data + machine learning technology. This is theAIPlineup mentioned earlier. Now, we have gone beyond processing and visualizing specialized data accumulated in-house to providing appropriate solutions when requested in human language.
https://www.youtube.com/watch?v=XEM5qz__HOU
Palantir AIP (Source: Palantir Youtube)
This isthe very appearance of AIthat some have been waiting for and others have been afraid of. Whatever it is, it is clear that this is the change that capital has been waiting for.
Reasons to be cautious about investing in Palantir
Overrated, overrated, overrated
In fact, the beginning and end of the pessimistic view of Palantir can be said to be overvaluation.
Company NamePalantirAutodeskAtlassianDatadogMicrosoftAlphabetMetaTickerPLTRADSKTEAMDDOGMSFTGOOGMETAFWD PER (Non-GAAP)76.5732.0381.1886.1735.4820.7424.8FWD PER (GAAP)173.6855.01-775.0535.620.6824.84PEG (Non-GAAP)1.622.151.365.462.361.261.2PSR (TTM)24.1310.0713.7518.8213.565.749.46PBR (TTM)15.8329.8459.5520.212.956.158.29Palantir Peer Group Value Index (Source: Seeking Alpha)
In fact, it is safe to say that high PER is the fate of growth stocks that are in the spotlight, so even if you try to ignore it, you honestly cannot handle a PSR well over 20. Many growth stocks often explain their high PER by saying, "Our company's prospects are so good that I'm investing all the money I make," but even if you buy this company and run away with all of 20 years of sales, you won't be able to get back even. Even if growth stocks are viewed as prospects rather than value, it is still a formidable number.
2025. 12 (E)2024. 12 (E)2023. 122022. 122021. 122020. 122019. 12Sales3,230.002,680.002,225.001,905.901,541.901,092.70742.6YoY%20.52%20.45%16.74%23.61%41.11%47.15%24.72%Palantir sales growth (Source: Seeking Alpha)
You might say, “Growth will cover everything,” but the sales growth so far is not that impressive. The growth so far and the forecast for 2024-25 are also around 20%. It can't be said to be bad, but it's not at a level that can forgive PSR 24. The encouraging part is that Revesion continues to improve. We should place our hopes on the CEO's comment that it is "an unmanageable level."
Other issues
Governance
This was also considered as a reason for investment concerns. If Palantir had been a stock classified simply as a blue chip or value stock, it would have been categorized as a point of criticism without hesitation.
Class F shares with variable voting rights mean that the founder and current CEO hold 49.9% of the voting rights, and when combined with Class B, management's voting rights reach 80%. You may wonder why voting rights are so important if management and growth are good, but there is no return to shareholders through dividends or share buybacks, and instead, management receives huge profits through stock compensation.
The company is obviously aware of this criticism, and the trend is currently continuing to decrease. The company's rapid profit improvement is partly attributable to this.
US presidential election and Palantir?
As it is a company that deals with military-related public data, it is difficult to completely separate it from politics. Founder Peter Thiel is known to be a Republican supporter, but following the last presidential election, he said he will “not support next year’s presidential election” ( https://seekingalpha.com/symbol/ADSK8 ). Namu Wiki mentions Peter Thiel as if he is still close to Trump, but according to the Guardian Thiel is said to have been greatly disappointed by Trump's first term, and Trump was angry at Thiel's refusal to support him.
However, Peter Thiel's political inclinations do not seem to have changed, and the company's relationship with the Department of Defense appears to have remained strong regardless of the government. (For reference, the current CEO is Alex Carp is a Democrat.)
There seems to be no particular need to combine investment with political issues.