Palantir stock hit all time lows recently and the altime high was about a year ago on February 8, 2021 when it reached 39.22 USD. It is now trading at about $13 and I decided to analyze the company through a DCF and share it with you guys. I'm very bullish on this stock and I think its a 10x in the next 10 years BUT I'm very conservative in my predictions and model so thats what I'll be presenting.
Lets take a look at the numbers and if you dont want to read, just go check out the Youtube video below or just search for Aconomics on your favorite Podcast app (including Spotify) and listen to it. And if you came for the DCF model, just scroll, click the link and make a copy for yourself.
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Now, lets get to it.
Palantir Stock Analysis
Palantir DCF Model
Hello, everybody. Welcome back to a Aconomics today. We're going to talk about Palantir. Palantir is a company that has so many haters. It's annoying. Okay. First I'm bullish and Palantir. I'm not going to make you wait until the end. I love this company. I love Alex carp. I love Peter Thiel. That's behind it.
I know he's a controversial figure, but putting politics aside, I think he's a brilliant, brilliant guy. And I think this company is going somewhere. But wait, before I forget, because I always forget this part. Please hit the like button. If you like the content, it helps a ton for every like i'll, buy more shares of Palantir a little bit, because maybe I'll go broke if I keep buying Palantir.
But anyway, let's talk about this company 📍 first. I'm not going to go into the whole politics of it. It's nonsensical this debate because first there's a lot of people hating on this. And let me show you this, just because Ross Gerber came out recently on MeetKevin and other channels and talked very badly.
Look at what he says. So Alex carb is one of the most evil people. Just. Just look at this guy, he looks like the Devil. So, so that's what he says on Alex carp, which makes no sense as an investment proposition to say that the CEO of a public company, just because he has his hair like this, he's an evil person. It's a little bit ridiculous, obviously he, I don't think he really understands the company, so let's go.
And because so many people misinterpret what this company does they went out and on medium, they explain exactly what they're not and what they are.
Let's check just before we go into the financials and my DCF model, which by the way, if you want to DCF, just go to Aconomics.Com search Palantir, or I'm going to put a link in the description. If you see it, you think it's too conservative or too bullish. I would love to know your opinion, but anyway, hit the like button because it helps a lot. I know I said it again, but it, because I usually forget, I'm just going to try to say it every time it pops into my head.
Let's go and check Palantir. Blog post here it is. Look, this is what they publish basically. Palantir is not a data broker or a data aggregator. That's some of the things that people accused them of. So basically they say unlike many tech companies our business model is not based on the monetization of personal data.
It's not. Based on that we do not collect store or sell personal data. We don't use personal data to train proprietary AI or machine learning models to share or resell to other customers. That's a very important thing because when you read in the news, CNN, CNBC, whatever many analysts don't understand what Palantir does, it's a software company.
So here they say right below. They go and say, let me put a bigger for you guys. We build digital infrastructure for data driven operations, and decision-making our products serve as the connective tissue between an organization's data it's analytics capabilities and operational execution. Okay. So I follow very technical people that try to explain every layer of technological advancements of their algorithms and other predictive models. And it's super complicated, but there are basically allowing corporations companies governments to make better decisions, whatever they may be. So I know it's a little bit of complicated company and a lot of people hate it, but let's just focus on the numbers.
Financials first let's go to, or tickers. We usually do this company is worth 28, almost billion dollars. And it was worth 9 billion back in 2014. So they've been growing steadily and it's not like they're a one year wonder and this company came out of nowhere, but they did their SPAC a year and a half ago.
So that's why a lot of people are talking about them, but very few people understand. We have three products. They have Foundry, Gotham and Apollo.
Apollo is a continuous delivery system that manages and deploys power to Gotham and Foundry. Foundry was the software used by the NHS in England, in dealing with a COVID-19 pandemic so it's an amazing product according to its clients And Gotham is the most talked about usually because it's the one that it's used as a predictive policing system. So it's the one that for example, ice used or uses solely came into fame with Trump.
Now let's go to our ticker now, we can see that even though a lot of people hate this company and they do, um, it has a short interest of 4 29.
That's nothing. So even people that hate it, like Ross Gerber. Uh, would not dare to, to bet against it. So that's always a good sign. Now, q3 revenue grew by 36% year over year to 392 million. So probably we're going to see over 450 on this earnings, Q3 us commercial revenue. 103% year over year. We can see here on top of me, and we can see that the pendant here going from 4% to 37% in commercial revenue growth, they added 34 new customers net 33 were at least 5,000,000 and 18 were 10. Even though we see that this company is worth 20 plus billion dollars then we see like, wait only 18 year old clients 10 million or more. That's 180 million. That's not much, how much are you making on them? We're going to see that.
But remember this clients are clients that are putting the Palantir software into their operation. Giving them an edge among their competitors and also helping Palantir continuously improve that broad moat that they have with competitors. So the way that they're doing, and it's going to accelerate the acquisition of new clients, new contracts, and expanding the contracts that they already have.
Let's remember, this is not a new company. This is not a startup. This company has been around for a while. Long time now let's go back to the earnings. Q3 adjusted free cash flow was 120 million up from minus 53 million and improvement of 172 million year over year representing a margin of 30%.
They continue to grow. So let's go to what we care about. If it's a good buy. It's a good time to acquire shares of this company. And before we go to the DCF, remember press the like button.
It really helps. For every like a buy, I don't know, 10 bucks of Palantir. I'm going to buy it anyway, So don't worry about, but to press it.
if we go to valuation valuation, let's see the, and the analyst before we check the DCF. So let's put here street targets. We have nine analysts, which to have a buy rating, one half outperform, four have hold, and two sells.
They say that the mean price. Target is 20 with 56. Obviously, this is after all the bad press and the PE contracting on the last few months that these are basically done in February, 2022, this, these ratings. So they're very, very fresh.
Now let's see my DCF remember, I'm super conservative in my estimates. So I'm going to explain them to you on the, this year that you can download from my website, aconomics.com or right down here, I put the link so you can go directly. Either way, remember to do your own analysis. This is my DCF. This is my thesis for investing in Palantir so bear that in mind. Okay. Basic info. Remember here units are in the thousands, basic info Palantir it's at 1387 shares outstanding current market cap of 27 billion.
Now the assumptions, let's be more conservative before we check it out. Let's put 9% perpetual growth rate. Let's assume 3%. Let's be very, very, very conservative, extremely, and let's put a multiple in five years of 20 for the company. let's go down here.
Remember that? What I do is I grab up what the consensus of the analyst have been saying. So the average of the analyst expectations and as smart as you might be, you're not going to be smarter than 20 guys that are paid to analyze this company and they go through everything. So I take the average of the analyst expectations for EBITDA and the depreciation and amortization, CapEx and changes in networking capital.
Remember unlevered free cashflow. When you do a DCF with unlevered, you're going to have, the person value afterwards, and then you have to deduct the net debt. Why? Because there's a difference between market capitalization and enterprise value, enterprise value. That's why here I put the net debt because its used for getting from the enterprise value to the market cap. I don't know if I'm explaining it well, but in any case, you know, put the comment below and I'll explain the better if you need. And if you do just click the like button because I'm doing this for free. So don't complain now, I do it in two ways as in my other discounted cash flows.
I use Terminal Value perpetual growth and as EBITDA exit multiple, so perpetual growth means, let's grab how fast are they going to grow after this fifth year? And you calculate the present value with that, perpetual growth percentage, and then you create the person value and you use it in your DCF equation.
The other style is EBITDA exit multiple. Now with this is you say, okay, I think that they're going to have a multiple of 20. They should have a multiple of 20 or 15 or whatever, and you calculate it from there, with the EBITDA. So I do it both and I plugged them in to get the market capitalization of both of them, then the stock price that they should have and the upside, well, this can be an upside or downside if we do the average, we go and see that the market cap should be 46 billion. When the stock price of 23,03. That means an upside of 66%. If we go up here and we put what I think that it should have a PE of 25, I think the discounted rate will not be nine. It could be 7 and the perpetual growth rate.
If we want to check it that way, it wouldn't be 3% because it's such a big company in there. It has such a big, Growth ahead of it. Let's not put five, a let's support, a four here tax rate. They're spending a lot, but they're going to make money. So let's leave it at 15. Remember that the tax rate in the us for corporate, it's usually a 21% that's around maximum that you see here by the companies that are investing a lot in that they have so many years of losses, they can deduct those losses in future years.
So I tried to put something average. So I put 15 but you can touch this, if you don't agree with me, the model, you can find it in aconomics.com. So if we plug this and we change it, we see that the stock price should be a 36 75 with a market cap of 73.6 billion and an upside of 165%. Remember, you can find it here. If you find it useful, consider supporting aconomics.com or subscribe to the newsletter, check the channel and hit like right here. I think it's right here. Just so you can do it super easily right now. If you just go with the clicking, that's it? Uh, the rest. Thank you very much. I hope you like it. I'm really hoping that you write me if you think I'm wrong or if you think I'm right, and, I'm very bullish on Palantir. You can check my portfolio. I think 5% of my portfolio is on Palantir four or five. You can check it. I put the link below, so I want to be transparent with everybody and that's it, thank you very much. Have a great day and see you tomorrow. Bye.