Growth
in
forward-looking
metrics
is
incredibly
important.
If
the
bootcamps
the
company
has
been
running
are
worth
it,
one
would
expect
increased
customer
adoption.
The
firm
has
been
highlighting
its
strength
in
AI
for
multiple
quarters
now,
so
we
must
see
large
upticks
in
demand
for
the
Artificial
Intelligence
Platform
at
some
point
if
its
projections
of
exponential
demand
are
to
be
trusted.
Similarly,
we’d
expect
an
increase
in
customers
who
use
Palantir
as
companies
onboard
the
firm
due
to
their
desire
to
leverage
AI.
We’ll
be
looking
at
commercial
clients
in
particular,
as
they
would
be
the
perfect
target
audience
for
AIP.
While
investors
keep
a
keen eye
on
growth
in
the
commercial
segment,
we
think
monitoring
Palantir’s
government
business
is
also
helpful/pertinent.
Governments
worldwide
seek
to
leverage
AI
in
their
operations,
defense,
and
more.
As
a
large
software
vendor
with
high
security
clearance,
Palantir
stands
to
gain
materially
from
this
trend.
Fair
Value
Estimate
for
Palantir
Shares
With
its
2-star
rating,
we
believe
Palantir’s
stock
is
overvalued
compared
with
our
long-term
fair
value
estimate
of
$16
per
share,
which
implies
a
2024
enterprise
value/sales
multiple
of
12
times.
We
forecast
Palantir’s
revenue
to
grow
at
a
21%
compound
annual
growth
rate
over
the
next
five
years
as
the
firm
expands
both
governmental
and
commercial
operations.
We
expect
the
majority
of
this
top-line
growth
to
be
driven
by
commercial
clients
as
the
firm
seeks
to
broaden
its
commercial
client
base.
While
government
clients
can
be
sticky,
large
governmental
contracts
create
lumpiness
in
revenue.
As
a
result,
Palantir’s
shift
to
more
commercial
clients
should
create
a
more
ratable
revenue
mix.
We
also
expect
the
firm
to
continue
expanding
sales
within
its
existing
client
base.
We
view
Palantir’s
strong
net
retention
rate
as
an
indicator
of
this.
Read
more
about
Palantir’s
fair
value
estimate
Key
Morningstar
Metrics
for
Palantir
Technologies
Fair
Value
Estimate:
$16.00
Morningstar
Rating: ★★
Economic
Moat:
Narrow
Morningstar
Uncertainty
Rating:
Very
High
Economic
Moat
Rating
We
assign
Palantir
a
narrow
moat,
owing
primarily
to
strong
switching
costs
associated
with
its
platforms
and
secondarily
to
intangible
assets
in
the
form
of
strong
customer
relationships
the
firm
has
built
up
over
the
years.
We
think
Palantir’s
two
main
platforms,
Gotham
and
Foundry,
both
benefit
from
high
customer
switching
costs,
as
evidenced
by
its
gross
and
net
retention
metrics.
Palantir
has
exhibited
strong
customer
growth
while
diversifying
its
business
away
from
lumpy
governmental
contracts
toward
commercial
clients.
As
a
result,
although
we
forecast
a
couple
of
more
years
of
hefty
operating
losses,
we
expect
the
firm
to
generate
excess
returns
over
invested
capital
over
the
next
decade.
Read
more
about
Palantir’s
economic
moat
Financial
Strength
We
view
Palantir’s
financial
position
as
healthy.
The
company
ended
fiscal
2023
with
around
$3.7
billion
in
cash
and
liquid
investments
and
no
debt.
While
Palantir
only
posted
GAAP
profitability
in
2023,
we
expect
the
firm
to
continue
this
trend
while
generating
strong
cash
flow
margins
as
it
increases
its
operating
leverage
by
toning
down
some
of
its
research
and
sales
expenditures.
Read
more
about
Palantir’s
financial
strength
Risk
and
Uncertainty
We
assign
Palantir
a
Very
High
Uncertainty
Rating
due
to
some
key
risks
that
we
view
as
potentially
impeding
its
growth
trajectory.
While
the
firm
has
landed
high-value
commercial
and
government
clients
over
the
years,
we
have
found
the
executive
team’s
execution
to
be
questionable
at
best.
The
firm’s
sales
strategy
has
led
to
relatively
poor
customer
acquisition,
despite
it
being
in
the
commercial
space
for
many
years,
Palantir’s
commercial
customer
count
is
only
slightly
more
than
200.
While
the
firm
has
pivoted
to
a
module-based
sales
model
that
should
bolster
commercial
customer
additions,
the
execution
of
this
strategy
remains
to
be
seen.
Read
more
about
Palantir’s
risk
and
uncertainty
PLTR
Bulls
Say
Palantir
has
strong
secular
tailwinds,
as
the
AI/ML
market
is
expected
to
grow
rapidly
due
to
the
exponential
increase
in
data
harvested
by
organisations.
With
products
targeting
both
commercial
and
governmental
clients,
Palantir
has
a
distributed
top
line,
with
noncyclical
governmental
revenue
insulating
the
overall
top
line
during
lean
times.
Palantir’s
focus
on
modular
sales
could
lead
to
substantially
more
commercial
clients,
which
it
could
subsequently
upsell.
PLTR
Bears
Say
By
not
selling
to
countries
or
companies
that
are
antithetical
to
its
mission
and
cultural
values,
Palantir
has
self-restricted
its
growth
opportunities.
Palantir’s
AI
platform
is
off
to
a
good
start,
but
we
anticipate
robust
competition
in
the
years
ahead.
Palantir’s
executive
team
has
(under
chief
executive
Alex
Karp,
pictured
above)
made
questionable
strategic
decisions
in
the
past.
While
past
performance
isn’t
necessarily
indicative
of
future
results,
the
missteps
could
merit
caution.
This
article
was
compiled
by
Leah
Breakstone
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