Palantir Valuation Tracker [July]

Monitoring Palantir's valuation to not overpay.

Editor: @Emanuele20x

Last month, Palantir at $8 was cheaper than Coca-Cola due to “Recession fears” (Is PLTR Recession Proof?).

Is it still cheap now?

PLTR 0.00%↑ is now at $10. This means that on ‘22FY it is valued:

• 10x EV/Sales;

• 33x EV/FCF.

These multiples include the effect of SBC in terms of the increased number of shares.

According to my framework, these multiples are still interesting for a company with:

• Recurring Revenues (Is Palantir Recession Proof?);

• +30% growth for many years.

For details on my method, you can read Palantir Buy Signals - A Dive Inside my Playbook.

PLTR Historical Multiple

Palantir’s EV/Sales NTM is still in its lowest range and nearly -40% from DPO.

EV/Sales NTM is lower than EV/Sales ‘22 because it considers ‘22q2-‘23q2 numbers which are expected to be higher than ‘22 FY numbers.

Peers Valuation

Compared with our last Peer Valuation (Palantir Deserves More - Peers Valuation), Palantir now trades deservedly at a similar multiple as ServiceNow ( NOW 0.00%↑ ), which I consider the closest financial comparable (Seeking the Alpha: PLTR vs NOW).

As a reminder:

Efficiency Score = Revenues Growth + FCF Margin.

To deserve a higher multiple like SNOW 0.00%↑ (16x EV/Sales) and DDOG 0.00%↑ (14x EV/Sales) Palantir needs to increase its growth.

Sector Valuation

Cloud companies still trade on avg. at a multi-year low at 6x EV/Sales.

Palantir could rebound if there will be renewed interest in SaaS companies.

Source: Bessemer Cloud Index

I believe this could happen as the main Cloud companies like CRM 0.00%↑ prove again the recurring nature of their businesses can overcome recessions (previous article), as they did in 2007-2011.

What I am doing

At this price, I am in “do nothing” since my avg. price is $8 per share (~35% of portfolio).

If the price drops below $7 again, after a misinterpretation of the financial results similar to Q1 (Palantir Q1: better than it seems), I would act.

We thrive in good times and we thrive in bad times. - Alex Karp, Palantir CEO

Yours,
Arny

Join me on:
Twitter: @arny_trezzi
Youtube: @Arny Investing
Discord Channel

View expresses are my own. Do not represent Financial Advice.

I own (many) PLTR 0.00%↑ stocks.