Palantir Technologies Inc. (NYSE: PLTR) builds software that empowers organizations to integrate their decisions, data and operations. It provides organizations with solutions for managing disparate data sets to achieve operational objectives.
Palantir sells software and services to corporations and governments seeking to solve problems using data analysis. The company offers three products: Foundry, Gotham and Apollo.
In this guide, Benzinga explores Palantir’s past and deep dives into the company’s operations and future.
How Palantir Makes Money
Palantir developed software that helps organizations solve complex problems using data. Palantir sells its data-mining platforms to governments and corporations to prevent terrorist attacks and tracking of infectious diseases. It generates revenue from its Foundry, Gotham and Apollo products.
Government institutions use Gotham to analyze counter-terrorism and other attacks. It’s an AI-ready operating system that accelerates and improves decisions for all operators involved. Gotham connects huge volumes of near real-time data and presents them in a single view — a feature that enables users to make quick and confident decisions.
Gotham has compiled complex data in simple terms for global defense agencies and disaster relief organizations. Access to such information enables decision-makers and the forward-deployed to access the latest event information while accounting for global tradeoffs.
Most Foundry users are commercial clients such as Fiat Chrysler and Airbus. Foundry is an end-to-end solution for decision-making by using data. It connects analytics, data and business teams to a common foundation.
Foundry enables organizations to make better decisions by closing the loop between analytics and operations. It integrates data in hours, allowing decision-makers to act swiftly. The software captures decisions and transformations in real time and feeds them back into the originating system.
Apollo manages and deploys Gotham and Foundry. It provides a single control layer to coordinate security updates and platform configuration to ensure critical systems constantly operate.
Palantir’s business model consists of acquiring, expanding and scaling.
After acquiring a client, Palantir provides system implementation for a low cost or free. Once the client’s revenue exceeds $100,000 annually, Palantir expands the implementation to identify the client’s challenges. Scaling happens after complete implementation and configuration. It’s then that clients can add their software to Palantir’s platform.
Palantir’s Stock Price
A stock price is an amount needed to purchase one share in a publicly-traded company. A share price isn’t fixed and fluctuates according to market conditions. Another way to define a stock price: it’s the highest amount buyers are willing to pay for a stock.
Where to Invest in Palantir
The easiest way you can buy Palantir shares is with an online broker. To save you time and money, Benzinga compiled a list of some of the best online brokers.
Venture capitalist Peter Thiel founded the company in 2003. The company’s name stems from the all-powerful seeing stone in the Lord of the Rings movie. Management’s objective was to create software that can mine and analyze disparate data sets and find connections between them.
After the 9/11 attacks, Palantir presented itself as a company that could have identified and stopped the hijackers and similar events. One of Palantir’s early investors was CIA’s venture capital arm, In-Q-Tel — the company’s only client for a few years during its technology improvement and refinement stage.
For the first few years of operation, Palantir’s clients consisted mostly of government agencies and a few private companies. During that period, the company was worth $1 billion. Its revenue increased as it attracted more corporate clients. Currently, Palantir’s market cap is $20.9 billion.
The company’s first product was Gotham. Government intelligence agencies and health organizations use it to fight terrorism and track infectious diseases. Palantir’s data mining played a significant role in finding Osama Bin Laden’s location.
Palantir introduced another two products: Foundry and Apollo. Foundry closes the loop between analytics and operations, enabling organizations to make better decisions. Apollo provides a single control layer to ensure critical systems stay up to date and operate 24/7.
The Centers for Disease Control and Prevention (CDC) announced in February 2022 that it granted Palantir a contract to support distribution and supply chain efforts for drugs. The contract is for six months and worth $5.3 million.
Palantir’s Q4 2021 earnings were $433 million, a 34% increase year over year. The annual revenue grew by 41% to $1.54 billion. The company’s commercial and government revenue increased from the previous year. Cash from operations was $344 million for 2021, representing a 22% margin.
Palantir’s stock has been in a downtrend since setting an all-time high in January 2021. The stock slid to IPO prices set in September 2020 and reached $10.30 in February 2022.
Despite Palantir increasing revenue in 2021, Ark Invest sold more than 11.7 million Palantir shares. The sale amounted to $123.2 million and was Ark’s third Palantir share sale in a week. Ark purchased almost $1 billion in Palantir shares in 2021.
Palantir has increased spending to rebuild its platform and expand into a growing commercial business.
Because of Palantir’s higher spending to expand commercially, its margins will decrease. The company stated it expected an adjusted operating margin for fiscal 2022 of 27%, a decrease from 31% in 2021. But the company also forecasted current-quarter sales above estimates. Its optimism stemmed from a boost in Q4 2021 commercial revenue and a steady flow of government contracts.
Citigroup remains bearish on Palantir’s stock. It lowered its target to $10 per share. Considering the stock has almost reached all-time lows, investors may be wondering if upside potential is imminent.
Some of the reasons for investors’ bearish sentiment are Palantir’s heavy dependence on government contracts, high competition and significant losses.
The company expects to increase revenue to $443 million in Q1 2022. CEO Alex Karp maintains an annual 30% revenue growth or higher until 2025. Considering the company’s $2.3 billion net cash and settling the remaining $200 million debt, it’s strongly positioned to fight rising interest rates.
Palantir announced that it would continue to power the digital operating system that U.S. public health uses for responses. The company has secured several multi-million dollar contracts spanning several years. Notable deals are an $823 million contract with the U.S. Army and a $116 million contract with Army Vintage.
Palantir: The C-Suite
Besides being the co-founder of PayPal Holdings Inc. (NASDAQ: PYPL), Peter Thiel also co-founded Palantir in 2003. He is the chairman, but his co-founders run the daily operations.
Besides being a co-founder, Karp occupied several positions at the company before becoming CEO. He has also served as a member of the board of directors since 2003. Karp earned a $12.1 million salary in 2019. But he earned $797.9 million worth of options and $296.4 million for stock rewards.
Cohen is another of the five founders. He has occupied several positions such as president and secretary. He’s been a director since 2005 and holds a B.S. in Computer Science from Stanford University. Cohen received two million shares through equity grants and has netted more than $50 million from stock trades.
Sankar started at Palantir in 2006 and has occupied various positions. Apart from being the COO, Sankar is the executive vice president. He obtained a B.S. in Electrical and Computer Engineering at Cornell University. Sankar also has an M.S. in Management and Engineering from Stanford University.
Frequently Asked Questions
What does Palantir do?
Palantir makes software that enables users to find solutions to complex problems by analyzing data. Palantir’s platform joins data and presents findings in a simple way for users to understand without needing to master statistical modeling.
Is Palantir a good investment?
Although Palantir’s stock price has tumbled for the last 12 months, the company’s earnings have consistently grown. Palantir’s revenue increased in Q4 2021 and for the year, and it expects to increase revenue in Q1 2022.
Why is Palantir not profitable?
Palantir has been heavily dependent on government contracts instead of increasing its corporate client base. The company has announced a margin drop to 27% in 2022 from 31% in 2021 because of increased spending to attract corporate clients.