maOQiu
2021-10-21
To the moon
Palantir Technologies: The Propeller Behind The Next Wave Of AI
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{"i18n":{"language":"zh_CN"},"detailType":1,"isChannel":false,"data":{"magic":2,"id":853995749,"tweetId":"853995749","gmtCreate":1634750724455,"gmtModify":1634750724690,"author":{"id":3553680669291881,"authorId":3553680669291881,"authorIdStr":"3553680669291881","name":"maOQiu","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"userType":1,"introduction":"","boolIsFan":false,"boolIsHead":false,"crmLevel":6,"crmLevelSwitch":0,"individualDisplayBadges":[],"starInvestorFlag":false},"themes":[],"images":[],"coverImages":[],"extraTitle":"","html":"<html><head></head><body><p>To the moon</p></body></html>","htmlText":"<html><head></head><body><p>To the moon</p></body></html>","text":"To the moon","highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":1,"repostSize":0,"favoriteSize":0,"link":"https://laohu8.com/post/853995749","repostId":1182025244,"repostType":2,"repost":{"id":"1182025244","pubTimestamp":1634710584,"share":"https://www.laohu8.com/m/news/1182025244?lang=&edition=full","pubTime":"2021-10-20 14:16","market":"us","language":"en","title":"Palantir Technologies: The Propeller Behind The Next Wave Of AI","url":"https://stock-news.laohu8.com/highlight/detail?id=1182025244","media":"Seeking Alpha","summary":"Summary\n\nPalantir continues to land government contracts, all while deploying its Platform down mark","content":"<p><b>Summary</b></p>\n<ul>\n <li>Palantir continues to land government contracts, all while deploying its Platform down market to startups, as it recently announced the second cohort of Foundry for Builders.</li>\n <li>Palantir’s advanced AI platform serves as the connective tissue for its customers' central operating system.</li>\n <li>Palantir’s U.S. commercial revenues increased by 90% year-over-year this past quarter and the commercial sector represents Palantir’s segment of accelerated growth over the next 10 years.</li>\n <li>Palantir’s intrinsic value is closer to $35 per share.</li>\n</ul>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/2986857b98507233cba412d2a8eb99ff\" tg-width=\"1536\" tg-height=\"987\" referrerpolicy=\"no-referrer\"><span>Andreas Rentz/Getty Images Entertainment</span></p>\n<p><b>Investment Thesis</b></p>\n<p>Palantir Technologies(NYSE:PLTR)is turning into one of the most powerful companies. Palantir is known for winning contracts with the government thanks to its Gotham Platform, but Palantir's most profitable opportunity remains targeting enterprises, SMBs, as well as consumers. Palantir is already working with technologies that aren't widely used today such as radar, satellites, and drones through its government contracts. This gives Palantir an advantage in working with the most advanced technology that's not widely used today as Palantir implements its software that \"empowers organizations to effectively integrate their data, decisions, and operations\".</p>\n<p>Palantir is led by visionary founders Alex Karp and Peter Thiel who are implementing a Zero-to-One strategy as Palantir engineered its software to serve as the backbone and connective tissue of modern organizations' data and operations. Palantir is creating a defensible MOAT by targeting the highest-level organizations, governments, and then deploying its versatile artificial intelligence software down market, across industries ranging from air travel, gene therapeutics, or autonomous EV helicopters. Palantir targets startups through its Foundry for Builders initiative, while it continues to land contracts with the government proving that its software is generating significant insights and alpha. Palantir's software continues to strengthen as it analyzes more data and is deployed for more use cases, while this, in turn, expands Palantir's addressable market.</p>\n<p><b>Background</b></p>\n<p>Palantir is always a fun company to revisit, especially since its third-quarter earnings are right around the corner. Palantir had a relatively quiet third quarter with no newly reported contracts. However, Palantir is off to a great start to the 4th quarter as it was recently selected for a contract by the Army and Palantir announced it's introducing the second cohort of Foundry for Builders initiative for start-ups. In this article, I will highlight Palantir's latest contract announcements from October and the opportunity that Palantir sees to move downstream, targeting smaller startups in up-and-coming industries.</p>\n<p>At Beating The Market, we've been bullish on Palantir since $10 and over the past two months. I'll attach a link to some of our latest notes, from my partner Ahan and me, that serves as a good backdrop for understanding Palantir.</p>\n<ol>\n <li>Palantir: A Generational Opportunity - discussion on Foundry, Palantir's commercial business</li>\n <li>Palantir Technologies Is Taking Over - discussion on Palantir's SPAC deals</li>\n <li>Palantir Is Uncannily Similar To Tesla - comparison between the successful business models</li>\n <li>Palantir Is Redefining Operating Systems For The Modern World - explanation of why Palantir's a revolutionary tech company</li>\n</ol>\n<p><b>Revenue Analysis</b></p>\n<p>Palantir's government contracts make up a substantial portion of its revenue, as seen below.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/cf5c32da34ecf43b1e3727ce2b6837a2\" tg-width=\"588\" tg-height=\"589\" referrerpolicy=\"no-referrer\"><span>Source: Deep Dive: Palantir Technologies</span></p>\n<p>Understanding the breakdown of Palantir's revenue is important to its long-term thesis because Palantir's real opportunity lies in deploying Foundry for commercial use whether that's to enterprises, start-ups, or one-day individual consumers. I explained this thesis in-depth in \"Palantir: A Generational Opportunity\" and determined that Foundry is worth ~$20 billion today on a standalone basis. Foundry is better positioned to accelerate revenue growth over the next 10 years compared to Gotham, its government Platform, given the nature of these types of contracts.</p>\n<p>Government contracts are extremely crucial for Palantir over the next few years because they serve as its lifeblood to fuel future growth in the commercial sector. The commercial sector represents Palantir's runway for accelerated growth over the next decade. There's potential upside in the government contracts and given the alpha that Palantir's software generates across an entire operating system. It is easy to see why governments would choose to implement more of Palantir's Platform and spend more than the minimum contract amount. The government has access to advanced technologies such as drones, wind turbines, satellite imaging as well as advanced models. These contracts give Palantir the opportunity to deploy its software to these innovative technologies while integrating with the government databases.</p>\n<p>Cathie Wood recently mentioned that Palantir's using technologies we'll find out about in five years, and what she means is that Palantir's government contracts allow Palantir to deploy its software to future technologies such as satellite imaging that people aren't even aware exists today. By partnering with the government and working with their complex models, Palantir's solutions grow stronger and stronger as they become easier to deploy to more complex instruments like wind turbines. As Palantir's use cases are only increasing, it becomes easier and faster to roll out its black-box solution to new customers within days. As technology improves, it becomes more affordable for people to access these new instruments, Palantir will be years ahead of its competition for deploying AI software, as it already is a clear leader.</p>\n<p><b>Recent Wins</b></p>\n<p>The fiscal year for the government ends September 30th, so it's no surprise that Palantir is landing new government contracts in October since they can start deploying new capital for the new year's budget. So far, Palantir's signed three contracts that could be worth nearly $1 billion if Palantir were to receive the maximum potential value of each contract.</p>\n<p><b>Contract with Department of Veteran Affairs - 10/7/21</b></p>\n<ul>\n <li>4 years</li>\n <li>$90 million</li>\n</ul>\n<p>This extends Palantir's first partnership with the VA to integrate data across from their legacy platforms that range from healthcare to defense-related data, so that leaders have deeper insights to offer the departments of veterans. Palantir enables the data collected from a variety of public and private hospitals to be leveraged together so that officials can gather deeper insights and offer more effective benefits to eligible veterans.</p>\n<p><b>NIH (National Institute of Health) NCATS (National Center for Advancing Translational Sciences) Contract 10/4/21</b></p>\n<ul>\n <li>Minimum - $7.9 million (over the first five months)</li>\n <li>Maximum -$60 million</li>\n <li>1 year, could potentially be 2 years</li>\n</ul>\n<p>Palantir provides a cloud-based \"dataenclave\" to provide a centralized data center on Covid to support a collaborative clinical research effort. This allows all the data and information from the largest collections of Covid to be stored and analyzed at one central location, so Palantir improves the access people have to data while also highlighting the most valuable information to determine which populations are most vulnerable.</p>\n<blockquote>\n Palantir was founded to put the most innovative software to work solving the world's most pressing challenges, and working to empower scientific research, especially when it comes to helping the most vulnerable, fits squarely within our mission.\" -Akash Jain, Palantir USG President\n</blockquote>\n<p><b>Government Contract with the Army (specifically Gotham) - 10/5/21</b></p>\n<ul>\n <li>Minimum - $3.5 million</li>\n <li>Maximum -$823 million</li>\n <li>4 years with an option for another 3 years (potentially 7 years)</li>\n</ul>\n<p>Palantir was recently selected overBAESystems(OTCPK:BAESF)(OTCPK:BAESY)by the U.S. Army's Program Manager for Intelligence Systems and Analytics to deliver data fabric and the analytics foundation for the Capability Drop 2 program.</p>\n<blockquote>\n Palantir will deploy the Palantir Gotham Platform to support Army Intelligence users worldwide with a globally federated Intelligence data fabric and analytics platform spanning multiple security classifications. This capability will field modern data integration, correlation, fusion, and analytic capabilities that prepare the Army for the next fight against emerging near peer threats.\" - Army Selects Palantir for Intelligence Data Fabric and Analytics SolutionPress Release\n</blockquote>\n<p>This enables Palantir to \"connect the dots\" between the data that it's collecting from this initiative as well as other areas where Palantir is deployed within the military. For example, Palantir's operating system is deployed in the uncrewed, solar-panel Skydweller aircraft. Since it's operating on the Palantir Platform, all the data can be easily communicated and analyzed to make the most effective decisions, which can be the difference between deterring the next war. In the video above, Palantir's platform is demonstrated through a notional example, and now that Palantir's secured a contract to deploy Gotham in the military's data fabric and analytics platform, Palantir will expand its Platform to individuals on the front line so they can better understand data that they generate and communicate the information with other parts of Palantir's operating system. This is truly the connective tissue because once another data source is added, the entire platform strengthens as it drives more effective results across the entire organization.</p>\n<p><b>Second Cohort of Foundry For Builders</b></p>\n<p>The contracts highlighted above are a good indication that Palantir's Platform generates alpha for its customers, but I'm more excited for Palantir's opportunity to expand down-market to individuals. Clearly, the military is starting to implement Palantir's Gotham Platform to individuals and now Palantir is targeting start-ups through Foundry for Builders. The first two groups of startups that Palantir's introduced thus far are connected to Palantir in some way and are \"hypergrowth\" startups. I expect that this is due to Palantir software's high costs to initially deploy and Palantir is already selective with its large customers, so partnering with Palantir alumni makes a lot of sense.</p>\n<p>This link takes you to a recent video from Palantir CEO, Alex Karp, highlighting the speed and power that Palantir's Foundry for Builders brings to startups. Palantir is essentially creating a venture capital fund and investing in Palantir Alums who are familiar with Palantir's Platform. If one of its customers within Foundry for Builders takes off, they'll be enabled by Palantir's software, while Palantir benefits from being the internal operating system behind their core businesses.</p>\n<p>Here's the list of some of the companies whose industries range from digital health to blockchain analytics, which shows the versatility of Palantir's Platform.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/d5594f92eee9e39c71763f77ba30f786\" tg-width=\"640\" tg-height=\"213\" referrerpolicy=\"no-referrer\"><span>Source: Palantir Introduces Second Cohort of \"Foundry for Builders\" Start-Ups</span></p>\n<p>The second cohort of startups is another strong batch of companies using Palantir to tackle new problems using the deep data analysis that Palantir provides. It speaks volumes that Palantir software is applicable to companies whether they operate a blockchain analytics platform, developing drugs for novel diseases, or optimizing wind farm performance. Palantir's government contracts play a key role in allowing Palantir's software to be applicable to smaller companies, as it can easily deploy its platform to early-stage companies experiencing strong growth.</p>\n<blockquote>\n We're excited to expand the use of Palantir Foundry to yet another group of hypergrowth startups. These organizations have ambitious goals and timelines - they see building on Foundry as infrastructure as the cheapest and fastest way to market. It takes too long and is too risky to manually build solutions from a bag of cloud services. Foundry's software-defined data integration and no-code applications mean customers can onboard new customers and develop new apps at a speed and cost that was previously inconceivable.\" -Shyam Sankar, Palantir COO\n</blockquote>\n<p>One of these hypergrowth companies is mePrism, which is democratizing the way in which individuals monetize the data they generate.</p>\n<p>This represents the future in which the digital economy will be centered around the internet of things (IoT). This puts consumers in charge of their data, which differs from the large tech companies profiting from consumers' data, as highlighted by the video. mePrism leverages Foundry to maximize the capabilities of consumers' appetites to match them with commercial outcomes. For example, mePrism uses the data from consumers to inform companies how to better improve their products, while those companies pay the consumer for their data.</p>\n<blockquote>\n Leveraging Palantir Foundry will empower us to offer consumer-facing businesses not only clean title data, but also the systems necessary to expertly navigate the world of data engineering, data science, compliance, and all of the regulation inherent in working with personal information\" -Tom Daly, CEO and Founder of mePrism\n</blockquote>\n<p>This is a great example of how Palantir's software is deployed to target individuals. mePrism collects a lot of data from many sources, so it's a good sign that Palantir's Platform is supporting use cases that will directly benefit consumers. I'm looking forward to hearing more commentary around Palantir's partnerships within Foundry for Builders. If these companies continue to generate hypergrowth, it supports the thesis that Foundry will have more use cases that expand the Platform to more companies tackling innovative problems and possibly one-day target individuals, which would expand Palantir's TAM.</p>\n<p><b>Financial Analysis</b></p>\n<p>Palantir's financials have improved from quarter to quarter ever since it was directly listed. The company has no financial debt and is free cash positive.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/5298ff6c0a2f8f2e0d07c59171d75ad4\" tg-width=\"640\" tg-height=\"379\" referrerpolicy=\"no-referrer\"><span>Source: YCharts</span></p>\n<p>Palantir sports strong profit margins and will strengthen over time. Palantir invests significantly in deploying its software, but once it is implemented, its top customers generate ~89% contribution margin, which is extremely high. Therefore, as Palantir software continues to be implemented and improves its efficiency, Palantir will generate an abundance of free cash flow, especially as its Platform is sticky and it will be hard for customers to switch from Palantir's software.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/7b8a846acc31ad8f024d53c843e651f7\" tg-width=\"640\" tg-height=\"322\" referrerpolicy=\"no-referrer\"><span>Source: Palantir Q2 Earnings Presentation</span></p>\n<p>In Q2, Palantir guided for $385 million in revenue for Q3, representing 49% YoY growth, while only generating 2.3% QoQ growth. Palantir is usually conservative with its guidance and could easily be sandbagging these numbers. Let's see what analysts on Seeking Alpha predict.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/8f407441b9b4255e32928e00dfefc030\" tg-width=\"640\" tg-height=\"69\" referrerpolicy=\"no-referrer\"><span>Source: Palantir Technologies Inc. Earnings Estimates</span></p>\n<p>Last quarter Palantir increased its revenue by 10% QoQ, while in Q3 of 2020 revenue growth was 14.8% QoQ, therefore I expect it to beat its revenue guidance of 2% quarterly growth. Palantir had a quiet quarter in terms of government contracts as the fiscal year ended, but with strong growth in commercial revenue, this quarter will help indicate the success of its commercial products, if we continue to see elevated growth from this segment.</p>\n<p><b>Valuation</b></p>\n<p>Now we will deploy the L.A. Stevens Valuation Model to determine what Palantir is worth today. First, we'll use a DCF model with FCF discounted by its cost of capital. Second, the model accounts for the change in Palantir's outstanding shares. Third, we'll normalize future growth prospects at the end of the year 2031 so that we can arrive at a 10-year CAGR for Palantir's share price.</p>\n<p>Assumptions:</p>\n<table>\n <tbody>\n <tr>\n <td><p>Forward 12-Month Revenue [A] (conservative estimate)</p></td>\n <td><p>$1.75 B</p></td>\n </tr>\n <tr>\n <td><p>Potential Free Cash Flow Margin [B]</p></td>\n <td><p>40%</p></td>\n </tr>\n <tr>\n <td><p>Average fully-diluted shares outstanding [C]</p></td>\n <td><p>~1.8 billion</p></td>\n </tr>\n <tr>\n <td><p>Free cash flow per share [ D = (A * B) / C ]</p></td>\n <td><p>$0.39</p></td>\n </tr>\n <tr>\n <td><p>Free cash flow per share growth rate (conservative estimate)</p></td>\n <td><p>30%</p></td>\n </tr>\n <tr>\n <td><p>Terminal growth rate</p></td>\n <td><p>3%</p></td>\n </tr>\n <tr>\n <td><p>Years of elevated growth</p></td>\n <td><p>10</p></td>\n </tr>\n <tr>\n <td><p>Total years to stimulate</p></td>\n <td><p>100</p></td>\n </tr>\n <tr>\n <td><p>Discount Rate (Our \"Next Best Alternative\")</p></td>\n <td><p>9.8%</p></td>\n </tr>\n </tbody>\n</table>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/c752289350aaea8d45891224f0d57103\" tg-width=\"640\" tg-height=\"790\" width=\"100%\" height=\"auto\"><span>Source: L.A. Stevens Valuation Model</span></p>\n<p>Based on our valuation model, Palantir is trading at a 32% discount at $24 per share.</p>\n<p>To determine Palantir's expected returns over the next 10 years, our model calculates a projected FCF per share value in year 10 and multiplies it with an assumed price to FCF multiple (35x), thereby generating a 2031 price target. Using this price target, the model generates an expected CAGR return for a ten-year investment.</p>\n<p><img src=\"https://static.tigerbbs.com/b6910bbe55c8b0f19a8ed4486cfbe9ca\" tg-width=\"640\" tg-height=\"458\" width=\"100%\" height=\"auto\"></p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/b6910bbe55c8b0f19a8ed4486cfbe9ca\" tg-width=\"640\" tg-height=\"458\" width=\"100%\" height=\"auto\"><span>Source: L.A Stevens Valuation Model</span></p>\n<p>Palantir's expected to generate 20% annualized returns over the next 10 years based on conservative estimates. Since this return beats our 15% hurdle rate and given that Palantir is a generational company, now could be an opportune time to invest in the company before institutional investors pile in, institutional ownership is only 26%.</p>\n<p><b>Risks</b></p>\n<ul>\n <li>Palantir's stock trades on more factors than its fundamentals, as evidenced by its rise to $45 last February when it was considered a \"meme\" stock. Palantir's hype as a meme stock settled down since the peak of the bubble in February. Palantir's been trading between ~$22 and $29 over the past two months. Since Palantir has 1.5M+ retail shareholders it could be a problem as retail investors are more likely to have weak hands-on market declines. Palantir's more focused on the long-term vision of its company and its core operations rather than the share price.</li>\n</ul>\n<blockquote>\n Stock-based compensation is an important factor to keep in mind before investing in Palantir. Palantir had over$1.2 billionin SBC in 2020, which is very high at first glance, but Palantir's founders have had a lot tied into the company since it was founded in 2003 and it makes sense that they wanted to liquidate some when it directly listed last fall. I expect that SBC will decrease after 2023, but it is a good thing that the employees/ leadership has a stake in the company because it indicates the conviction, they have in Palantir's solutions. Palantir's employees have proven its most valuable resources prior to direct listing, and it creates more of an incentive for employees to be invested in the long-term prospects of the company, as their future is tied up in Palantir's growth. I don't expect these expenses to be as high this year, while it shouldn't affect Palantir's income statement in 2022 and beyond, to the extent it did in 2020\"\n</blockquote>\n<blockquote>\n Source:Author's previous note\n</blockquote>\n<p><b>Conclusion</b></p>\n<p>Palantir continues to land government contracts, while it is moving down market and targeting smaller, fast-growing businesses. Palantir is creating a defensible MOAT because its software is embedded into its customers' core operations if they're able to get the most out of deploying Palantir's software. Palantir's black-box solution is so effective because it generates alpha \"amidst continuous disruption\" and by bringing its AI solutions to the highest-level organizations as well as innovative startups. Palantir is leveraging its software to create network effects while continuing to innovate its Platform.</p>\n<p>Palantir remains one of my highest conviction stocks and at ~$24, it's trading at a fair valuation ~$50B market cap, hence I rate Palantir a buy under $28.</p>","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Palantir Technologies: The Propeller Behind The Next Wave Of AI</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nPalantir Technologies: The Propeller Behind The Next Wave Of AI\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-10-20 14:16 GMT+8 <a href=https://seekingalpha.com/article/4460211-palantir-technologies-pltr-propeller-next-wave-ai><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nPalantir continues to land government contracts, all while deploying its Platform down market to startups, as it recently announced the second cohort of Foundry for Builders.\nPalantir’s ...</p>\n\n<a href=\"https://seekingalpha.com/article/4460211-palantir-technologies-pltr-propeller-next-wave-ai\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"PLTR":"Palantir Technologies Inc."},"source_url":"https://seekingalpha.com/article/4460211-palantir-technologies-pltr-propeller-next-wave-ai","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1182025244","content_text":"Summary\n\nPalantir continues to land government contracts, all while deploying its Platform down market to startups, as it recently announced the second cohort of Foundry for Builders.\nPalantir’s advanced AI platform serves as the connective tissue for its customers' central operating system.\nPalantir’s U.S. commercial revenues increased by 90% year-over-year this past quarter and the commercial sector represents Palantir’s segment of accelerated growth over the next 10 years.\nPalantir’s intrinsic value is closer to $35 per share.\n\nAndreas Rentz/Getty Images Entertainment\nInvestment Thesis\nPalantir Technologies(NYSE:PLTR)is turning into one of the most powerful companies. Palantir is known for winning contracts with the government thanks to its Gotham Platform, but Palantir's most profitable opportunity remains targeting enterprises, SMBs, as well as consumers. Palantir is already working with technologies that aren't widely used today such as radar, satellites, and drones through its government contracts. This gives Palantir an advantage in working with the most advanced technology that's not widely used today as Palantir implements its software that \"empowers organizations to effectively integrate their data, decisions, and operations\".\nPalantir is led by visionary founders Alex Karp and Peter Thiel who are implementing a Zero-to-One strategy as Palantir engineered its software to serve as the backbone and connective tissue of modern organizations' data and operations. Palantir is creating a defensible MOAT by targeting the highest-level organizations, governments, and then deploying its versatile artificial intelligence software down market, across industries ranging from air travel, gene therapeutics, or autonomous EV helicopters. Palantir targets startups through its Foundry for Builders initiative, while it continues to land contracts with the government proving that its software is generating significant insights and alpha. Palantir's software continues to strengthen as it analyzes more data and is deployed for more use cases, while this, in turn, expands Palantir's addressable market.\nBackground\nPalantir is always a fun company to revisit, especially since its third-quarter earnings are right around the corner. Palantir had a relatively quiet third quarter with no newly reported contracts. However, Palantir is off to a great start to the 4th quarter as it was recently selected for a contract by the Army and Palantir announced it's introducing the second cohort of Foundry for Builders initiative for start-ups. In this article, I will highlight Palantir's latest contract announcements from October and the opportunity that Palantir sees to move downstream, targeting smaller startups in up-and-coming industries.\nAt Beating The Market, we've been bullish on Palantir since $10 and over the past two months. I'll attach a link to some of our latest notes, from my partner Ahan and me, that serves as a good backdrop for understanding Palantir.\n\nPalantir: A Generational Opportunity - discussion on Foundry, Palantir's commercial business\nPalantir Technologies Is Taking Over - discussion on Palantir's SPAC deals\nPalantir Is Uncannily Similar To Tesla - comparison between the successful business models\nPalantir Is Redefining Operating Systems For The Modern World - explanation of why Palantir's a revolutionary tech company\n\nRevenue Analysis\nPalantir's government contracts make up a substantial portion of its revenue, as seen below.\nSource: Deep Dive: Palantir Technologies\nUnderstanding the breakdown of Palantir's revenue is important to its long-term thesis because Palantir's real opportunity lies in deploying Foundry for commercial use whether that's to enterprises, start-ups, or one-day individual consumers. I explained this thesis in-depth in \"Palantir: A Generational Opportunity\" and determined that Foundry is worth ~$20 billion today on a standalone basis. Foundry is better positioned to accelerate revenue growth over the next 10 years compared to Gotham, its government Platform, given the nature of these types of contracts.\nGovernment contracts are extremely crucial for Palantir over the next few years because they serve as its lifeblood to fuel future growth in the commercial sector. The commercial sector represents Palantir's runway for accelerated growth over the next decade. There's potential upside in the government contracts and given the alpha that Palantir's software generates across an entire operating system. It is easy to see why governments would choose to implement more of Palantir's Platform and spend more than the minimum contract amount. The government has access to advanced technologies such as drones, wind turbines, satellite imaging as well as advanced models. These contracts give Palantir the opportunity to deploy its software to these innovative technologies while integrating with the government databases.\nCathie Wood recently mentioned that Palantir's using technologies we'll find out about in five years, and what she means is that Palantir's government contracts allow Palantir to deploy its software to future technologies such as satellite imaging that people aren't even aware exists today. By partnering with the government and working with their complex models, Palantir's solutions grow stronger and stronger as they become easier to deploy to more complex instruments like wind turbines. As Palantir's use cases are only increasing, it becomes easier and faster to roll out its black-box solution to new customers within days. As technology improves, it becomes more affordable for people to access these new instruments, Palantir will be years ahead of its competition for deploying AI software, as it already is a clear leader.\nRecent Wins\nThe fiscal year for the government ends September 30th, so it's no surprise that Palantir is landing new government contracts in October since they can start deploying new capital for the new year's budget. So far, Palantir's signed three contracts that could be worth nearly $1 billion if Palantir were to receive the maximum potential value of each contract.\nContract with Department of Veteran Affairs - 10/7/21\n\n4 years\n$90 million\n\nThis extends Palantir's first partnership with the VA to integrate data across from their legacy platforms that range from healthcare to defense-related data, so that leaders have deeper insights to offer the departments of veterans. Palantir enables the data collected from a variety of public and private hospitals to be leveraged together so that officials can gather deeper insights and offer more effective benefits to eligible veterans.\nNIH (National Institute of Health) NCATS (National Center for Advancing Translational Sciences) Contract 10/4/21\n\nMinimum - $7.9 million (over the first five months)\nMaximum -$60 million\n1 year, could potentially be 2 years\n\nPalantir provides a cloud-based \"dataenclave\" to provide a centralized data center on Covid to support a collaborative clinical research effort. This allows all the data and information from the largest collections of Covid to be stored and analyzed at one central location, so Palantir improves the access people have to data while also highlighting the most valuable information to determine which populations are most vulnerable.\n\n Palantir was founded to put the most innovative software to work solving the world's most pressing challenges, and working to empower scientific research, especially when it comes to helping the most vulnerable, fits squarely within our mission.\" -Akash Jain, Palantir USG President\n\nGovernment Contract with the Army (specifically Gotham) - 10/5/21\n\nMinimum - $3.5 million\nMaximum -$823 million\n4 years with an option for another 3 years (potentially 7 years)\n\nPalantir was recently selected overBAESystems(OTCPK:BAESF)(OTCPK:BAESY)by the U.S. Army's Program Manager for Intelligence Systems and Analytics to deliver data fabric and the analytics foundation for the Capability Drop 2 program.\n\n Palantir will deploy the Palantir Gotham Platform to support Army Intelligence users worldwide with a globally federated Intelligence data fabric and analytics platform spanning multiple security classifications. This capability will field modern data integration, correlation, fusion, and analytic capabilities that prepare the Army for the next fight against emerging near peer threats.\" - Army Selects Palantir for Intelligence Data Fabric and Analytics SolutionPress Release\n\nThis enables Palantir to \"connect the dots\" between the data that it's collecting from this initiative as well as other areas where Palantir is deployed within the military. For example, Palantir's operating system is deployed in the uncrewed, solar-panel Skydweller aircraft. Since it's operating on the Palantir Platform, all the data can be easily communicated and analyzed to make the most effective decisions, which can be the difference between deterring the next war. In the video above, Palantir's platform is demonstrated through a notional example, and now that Palantir's secured a contract to deploy Gotham in the military's data fabric and analytics platform, Palantir will expand its Platform to individuals on the front line so they can better understand data that they generate and communicate the information with other parts of Palantir's operating system. This is truly the connective tissue because once another data source is added, the entire platform strengthens as it drives more effective results across the entire organization.\nSecond Cohort of Foundry For Builders\nThe contracts highlighted above are a good indication that Palantir's Platform generates alpha for its customers, but I'm more excited for Palantir's opportunity to expand down-market to individuals. Clearly, the military is starting to implement Palantir's Gotham Platform to individuals and now Palantir is targeting start-ups through Foundry for Builders. The first two groups of startups that Palantir's introduced thus far are connected to Palantir in some way and are \"hypergrowth\" startups. I expect that this is due to Palantir software's high costs to initially deploy and Palantir is already selective with its large customers, so partnering with Palantir alumni makes a lot of sense.\nThis link takes you to a recent video from Palantir CEO, Alex Karp, highlighting the speed and power that Palantir's Foundry for Builders brings to startups. Palantir is essentially creating a venture capital fund and investing in Palantir Alums who are familiar with Palantir's Platform. If one of its customers within Foundry for Builders takes off, they'll be enabled by Palantir's software, while Palantir benefits from being the internal operating system behind their core businesses.\nHere's the list of some of the companies whose industries range from digital health to blockchain analytics, which shows the versatility of Palantir's Platform.\nSource: Palantir Introduces Second Cohort of \"Foundry for Builders\" Start-Ups\nThe second cohort of startups is another strong batch of companies using Palantir to tackle new problems using the deep data analysis that Palantir provides. It speaks volumes that Palantir software is applicable to companies whether they operate a blockchain analytics platform, developing drugs for novel diseases, or optimizing wind farm performance. Palantir's government contracts play a key role in allowing Palantir's software to be applicable to smaller companies, as it can easily deploy its platform to early-stage companies experiencing strong growth.\n\n We're excited to expand the use of Palantir Foundry to yet another group of hypergrowth startups. These organizations have ambitious goals and timelines - they see building on Foundry as infrastructure as the cheapest and fastest way to market. It takes too long and is too risky to manually build solutions from a bag of cloud services. Foundry's software-defined data integration and no-code applications mean customers can onboard new customers and develop new apps at a speed and cost that was previously inconceivable.\" -Shyam Sankar, Palantir COO\n\nOne of these hypergrowth companies is mePrism, which is democratizing the way in which individuals monetize the data they generate.\nThis represents the future in which the digital economy will be centered around the internet of things (IoT). This puts consumers in charge of their data, which differs from the large tech companies profiting from consumers' data, as highlighted by the video. mePrism leverages Foundry to maximize the capabilities of consumers' appetites to match them with commercial outcomes. For example, mePrism uses the data from consumers to inform companies how to better improve their products, while those companies pay the consumer for their data.\n\n Leveraging Palantir Foundry will empower us to offer consumer-facing businesses not only clean title data, but also the systems necessary to expertly navigate the world of data engineering, data science, compliance, and all of the regulation inherent in working with personal information\" -Tom Daly, CEO and Founder of mePrism\n\nThis is a great example of how Palantir's software is deployed to target individuals. mePrism collects a lot of data from many sources, so it's a good sign that Palantir's Platform is supporting use cases that will directly benefit consumers. I'm looking forward to hearing more commentary around Palantir's partnerships within Foundry for Builders. If these companies continue to generate hypergrowth, it supports the thesis that Foundry will have more use cases that expand the Platform to more companies tackling innovative problems and possibly one-day target individuals, which would expand Palantir's TAM.\nFinancial Analysis\nPalantir's financials have improved from quarter to quarter ever since it was directly listed. The company has no financial debt and is free cash positive.\nSource: YCharts\nPalantir sports strong profit margins and will strengthen over time. Palantir invests significantly in deploying its software, but once it is implemented, its top customers generate ~89% contribution margin, which is extremely high. Therefore, as Palantir software continues to be implemented and improves its efficiency, Palantir will generate an abundance of free cash flow, especially as its Platform is sticky and it will be hard for customers to switch from Palantir's software.\nSource: Palantir Q2 Earnings Presentation\nIn Q2, Palantir guided for $385 million in revenue for Q3, representing 49% YoY growth, while only generating 2.3% QoQ growth. Palantir is usually conservative with its guidance and could easily be sandbagging these numbers. Let's see what analysts on Seeking Alpha predict.\nSource: Palantir Technologies Inc. Earnings Estimates\nLast quarter Palantir increased its revenue by 10% QoQ, while in Q3 of 2020 revenue growth was 14.8% QoQ, therefore I expect it to beat its revenue guidance of 2% quarterly growth. Palantir had a quiet quarter in terms of government contracts as the fiscal year ended, but with strong growth in commercial revenue, this quarter will help indicate the success of its commercial products, if we continue to see elevated growth from this segment.\nValuation\nNow we will deploy the L.A. Stevens Valuation Model to determine what Palantir is worth today. First, we'll use a DCF model with FCF discounted by its cost of capital. Second, the model accounts for the change in Palantir's outstanding shares. Third, we'll normalize future growth prospects at the end of the year 2031 so that we can arrive at a 10-year CAGR for Palantir's share price.\nAssumptions:\n\n\n\nForward 12-Month Revenue [A] (conservative estimate)\n$1.75 B\n\n\nPotential Free Cash Flow Margin [B]\n40%\n\n\nAverage fully-diluted shares outstanding [C]\n~1.8 billion\n\n\nFree cash flow per share [ D = (A * B) / C ]\n$0.39\n\n\nFree cash flow per share growth rate (conservative estimate)\n30%\n\n\nTerminal growth rate\n3%\n\n\nYears of elevated growth\n10\n\n\nTotal years to stimulate\n100\n\n\nDiscount Rate (Our \"Next Best Alternative\")\n9.8%\n\n\n\nSource: L.A. Stevens Valuation Model\nBased on our valuation model, Palantir is trading at a 32% discount at $24 per share.\nTo determine Palantir's expected returns over the next 10 years, our model calculates a projected FCF per share value in year 10 and multiplies it with an assumed price to FCF multiple (35x), thereby generating a 2031 price target. Using this price target, the model generates an expected CAGR return for a ten-year investment.\n\nSource: L.A Stevens Valuation Model\nPalantir's expected to generate 20% annualized returns over the next 10 years based on conservative estimates. Since this return beats our 15% hurdle rate and given that Palantir is a generational company, now could be an opportune time to invest in the company before institutional investors pile in, institutional ownership is only 26%.\nRisks\n\nPalantir's stock trades on more factors than its fundamentals, as evidenced by its rise to $45 last February when it was considered a \"meme\" stock. Palantir's hype as a meme stock settled down since the peak of the bubble in February. Palantir's been trading between ~$22 and $29 over the past two months. Since Palantir has 1.5M+ retail shareholders it could be a problem as retail investors are more likely to have weak hands-on market declines. Palantir's more focused on the long-term vision of its company and its core operations rather than the share price.\n\n\n Stock-based compensation is an important factor to keep in mind before investing in Palantir. Palantir had over$1.2 billionin SBC in 2020, which is very high at first glance, but Palantir's founders have had a lot tied into the company since it was founded in 2003 and it makes sense that they wanted to liquidate some when it directly listed last fall. I expect that SBC will decrease after 2023, but it is a good thing that the employees/ leadership has a stake in the company because it indicates the conviction, they have in Palantir's solutions. Palantir's employees have proven its most valuable resources prior to direct listing, and it creates more of an incentive for employees to be invested in the long-term prospects of the company, as their future is tied up in Palantir's growth. I don't expect these expenses to be as high this year, while it shouldn't affect Palantir's income statement in 2022 and beyond, to the extent it did in 2020\"\n\n\n Source:Author's previous note\n\nConclusion\nPalantir continues to land government contracts, while it is moving down market and targeting smaller, fast-growing businesses. Palantir is creating a defensible MOAT because its software is embedded into its customers' core operations if they're able to get the most out of deploying Palantir's software. Palantir's black-box solution is so effective because it generates alpha \"amidst continuous disruption\" and by bringing its AI solutions to the highest-level organizations as well as innovative startups. Palantir is leveraging its software to create network effects while continuing to innovate its Platform.\nPalantir remains one of my highest conviction stocks and at ~$24, it's trading at a fair valuation ~$50B market cap, hence I rate Palantir a buy under $28.","news_type":1},"isVote":1,"tweetType":1,"viewCount":0,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"CN","currentLanguage":"CN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"upFlag":false,"length":9,"xxTargetLangEnum":"ZH_CN"},"commentList":[],"isCommentEnd":true,"isTiger":false,"isWeiXinMini":false,"url":"/m/post/853995749"}
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