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A collection of the most frequently asked questions about Palantir.
Is Palantir a consultancy?
No. Palantir is a software company and ranks among the best.
What is Palantir's “secret sauce”?
Its ability to decrease the time needed to scale as it grows.
Is Palantir unprofitable?
Palantir is GAAP unprofitable due to Stock Based Compensation (“SBC”), but produces strong Free Cash Flow, which is far more important.
When will SBC ease?
SBC is not going to disappear. However, it should “normalize” to 5-7% per year as Palantir scales and SBC will have a lower impact.
When will Palantir become GAAP profitable?
Even by conservative assumptions, Palantir should become GAAP profitable by 2024.
Is Palantir recession-proof?
Not only can Palantir survive a recession, they can actually benefit from one since it helps companies solve their most existential problems.
Why is each client so important?
Each client acquired can potentially reach $100mn/per year, similar to the existing Top 3 clients.
How can Palantir scale faster?
Palantir should scale thanks to the newly built salesforce, which is still tiny when compared to other companies in the sector but able to generate 5x the Revenues.
Is Palantir laying off people like other tech companies?
No, Palantir is hiring aggressively, especially in the Sales department.
Is Palantir an Alpha company?
We can’t say Palantir is an Alpha company yet. However, there are clear signs of strength in its financials that indicate an Alpha company in the making.
What is Palantir's most important bet?
Succeeding in the US Enterprise Software market is the most crucial bet. Without succeeding there, Palantir has no chance of becoming a $1trn company.
How can I understand if Palantir stock is cheap?
My simple method involves comparing Enterprise Value / FCF to the FCF growth in order to intuitively assess how attractive Palantir is, at a given price.
Earnings Release: what should I look for?
Some metrics are more important than others. At this stage, client growth is the most crucial one.
Is Margin compression a negative thing?
Not necessarily. Margin compression due to strong marketing activity which leads to significant client acquisition is actually a positive sign.
Why did Government business slow down?
The recent slowdown in Government is not Palantir’s “fault” only because there were delays in the budget enaction affecting all military contractors.
How can I deal with SBC in the Discounted Free Cash Flow (“DCF”) model?
SBC is a non-cash expense but a real cost to shareholders because it dilutes them. A proper DCF should consider the dilutive impact while keeping FCF a cash item.
How can I check if Palantir is cheap versus its competitors?
Palantir competes in the cloud sector. The best way to compare it to other Cloud companies is by looking at the combination of Growth and Free Cash Flow Margins.
Is Palantir really cheaper than Coca-Cola?
The financial world is driven by narratives. Between perception and reality lies opportunity.
Why is space so important for Palantir?
Space is crucial as a deterrent from war but it is also attracting Commercial companies. Palantir seeks to become the gatekeeper to access business in space.
Is Palantir a Black Box?
Only for those who are not yet subscribed to Laorca!
View expresses are my own. Do not represent Financial Advice.
I own (many) PLTR 0.00%↑ stocks.