Deep Dive: Palantir
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What do they do? Palantir is a data analytics and management firm for government institutions and large enterprises.
History? Palantir was founded in 2003 by a five group team led by Peter Thiel. Their first platform, Gotham, was launched in 2008 and the company recently moved its headquarters to Denver.
Industry? Palantir operates in a unique market so it is hard to pin down any competitors. They estimate their market opportunity at $119 billio and estimate they have 3% of the data analytics market currently.
Management? CEO is Alex Karp. He is a bit of a character (just read any transcript to see what I mean) and owns 1% of the company. Peter Thiel owns 7% of the business.
Valuation? EV/sales of 45 at the time of recording. EV/GP of 66 at the time of recording.
Earnings? FY 2020 revenue of $1.1 billion, up 47% YoY. Operating loss over $1.2 billion due to IPO expenses (expect this to turnaround in 2021).
Balance Sheet? About $2 billion in cash and $450 million in debt/leases. No concerns on the balance sheet.
Potential Competitive Advantages? Network effects, scale, and security assurances for their customers.
Potential Future Growth Opportunities? Upgrading UI, industrial companies, and average revenue per customer.
Highlights? Strong moat from scale/data advantage, customer contract size, and clear path to growth if management is correct in their opportunities.
Lowlights? Eccentric management, egregious stock comp, and customer concentration.
Disclosure: The authors and podcast guests are not financial advisors. Brett Schafer and Ryan Henderson are portfolio managers at Arch Capital. Clients of Arch Capital may hold securities discussed on this podcast.