Tag Archives: Palantir

Palantir’s $100 Million Loss

Palantir released its earnings for the first quarter of 2021 today, and it’s not looking good. This 18 year old company that has never made a profit turned in a net loss of $123 million, versus $54 million in the first quarter of 2020.

This is actually a little better than the full year results in 2020, where losses reached nearly $100 million per month. But quarter on quarter, the picture is significantly worse. I’ll be curious to see if last year’s pattern of escalating losses through the year holds again in 2021.

Selling and general/administrative expenses held Palantir’s results down. I saw a similar picture in 2020, and one factor may be the extensive free trials they give customers. I question whether this business model can produce profits, especially given its long history of burning cash. Amazon and Google invested for the future and delayed profits, but not into nonexistence. Google was profitable in 3 years and Amazon in 7.

These poor results don’t seem to trouble CEO Alexander Karp, though. He took home $1 billion in compensation last year while the company lost a similar amount. Hey Alex, how about returning that so the shareholders can at least break even?

Dig into these posts for more on Palantir:

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Palantir CEO Paid $1 Billion to Lose Money

Palantir CEO Alex Karp earned compensation worth about $1.1 billion in 2020, primarily through equity awards granted shortly before his software company went public.

More here.

This company is losing $100 million a month and has never turned a profit in 18 years of existence. I know, I know, Amazon. But Amazon and Google turned a profit in 3-7 years. In my work investing in early stage tech startups, I routinely see even young companies that have reached the breakeven point. Why can’t Palantir?

Palantir is losing $100 million a month and has never turned a profit in 18 years of existence. #palantir #stocks

It’s no wonder that the CEO is able to pay himself so well. He and a couple other co-founders control the voting shares in the company even if they sell their shares. The votes each of their shares has rises whenever they sell, so they maintain control. This arrangement is so controversial they’re actually being sued for it as we speak.

Palantir reminds me a lot of WeWork. Charismatic founder, heavily hyped tech company, nonexistent earnings, ironclad founder control, and excessive CEO pay. And we know how that turned out.

Indeed, Karp seems to be cashing in as fast as he can while things are good:

At the time of the New York Stock Exchange listing, Karp owned about $1 billion worth of Palantir stock. He’s since sold about $350 million worth at share prices ranging from $9.10 to $31.59, according to SEC filings.

Dig into these posts for more on Palantir:

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Palantir Is Growing at a Snail’s Pace

Despite its lofty valuation, Palantir Technologies Inc. is barely growing:

In the fourth quarter, he points out, Palantir signed 21 deals worth more than $5 million, and 12 of more than $10 million. But he adds that it isn’t clear how many of those are actually new customers, as opposed to new projects with existing customers.

He notes that given total customer count went to 139 at year end from 132 one quarter earlier, it would seem that most of the new work is from previous customers. “New customer growth is what will ultimately be required to show the commercial momentum the market wants to see longer term,” he writes. “In this regard, the data is still mixed.”

Seven new customers, net, in 3 months? Not terribly impressive for a company with a market cap of $43 billion and a forward price/earnings ratio of 169. That ratio implies a company that is growing like crazy, not signing a couple of customers a quarter.

Other reports have indicated growth in their core government contracting business has slowed to a crawl. On the commercial side, 20% of revenue comes from a single customer. The business in general is concentrated in a handful of large customers, any one of whose departure would sting, big time.

Until Palantir grows at a rate to justify its buoyant stock price, I’ll be keeping my distance.

For more on Palantir, check out these posts:

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Photo: “PandoMonthly – April 2012 – Sarah Lacy Interviews Peter Thiel” by thekenyeung is licensed under CC BY-NC-ND 2.0

Bullish Investors Pile Into Palantir Options

Investors are piling into call options on Palantir Technologies, Inc. this week, expecting the stock to head upward:

“Palantir saw above-average call activity [Monday], about 90,000 contracts more than it trades on average, and the most action was seen in the 24-, 25- and 26-strike calls that expire this coming Friday. The 24-strike calls, for example, traded about 45,000 contracts. Those were trading for just under 70 cents,” Optimize Advisors CIO Michael Khouw said Monday on CNBC’s “Fast Money.”

Those 24-strike calls break even at an underlying stock price of $24.70, or about 6% higher from where Palantir closed Monday’s session. More bullish traders who took a chance on the 26-strike calls would need to see a jump of more than 12% by Friday’s close to break even.

Some may be reacting to a recent push from Palantir into the life sciences, diversifying from its bread-and-butter of government clients:

In a continued push to expand its business beyond the sometimes-controversial federal defense and intelligence contracts it’s best-known for, $42 billion big data company Palantir is making a new push into industries including life sciences and manufacturing.

That push comes in the form of new capabilities for Palantir Foundry, its product for the private sector, which will be showcased at a company event it calls Double Click on Wednesday.

However, the stock is richly valued and its core government contracting business is growing slowly. Commercial sales growth is also weak, at a mere 4% in Q4 2020. And 20% of that slow growing commercial business is a single customer. Indeed, a small number of clients drive Palantir’s revenue, exposing the company to a big risk if several were to leave at once. The concentrated and slow growing customer base, along with a hefty price, will keep me away from this stock.

For more on Palantir, check out these posts:

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Photo: Palantir co-founder Peter Thiel. “Peter Thiel” by jdlasica is licensed under CC BY 2.0

Palantir Stung By Slow Government Contracting Business

Palantir Technologies’ business is largely driven by government contracts. So far in 2021, despite a new Department of Energy contract, the overall picture is not looking good:

The Department of Energy win could potentially add $18 million in incremental revenue per year, but Mielczarek says that, otherwise, the investment firm’s Dotted Line tracker shows that Palantir “had a fairly quiet first quarter for government bookings.”

Besides an early January $8.5 million Army TITAN prototype award, there were no other government contract wins in the quarter.

Palantir’s business is largely driven by government contracts, and so far in 2021, it’s not looking good

This stock trades at a rich multiple, so it needs rapid growth to justify that. The numbers aren’t much better on the commercial side of the business:

“Palantir’s commercial sales increased by 4% in the December quarter,” Mielczarek noted. “The new sales strategy is showing potential, but we believe that it is too early to bet on.”

Add that to the fact that 20% of their commercial business is a single customer, and this looks like an overvalued, moderate growth company with some serious embedded risks. I’ll be avoiding this stock.

For more on Palantir, check out these posts:

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Photo: Palantir co-founder Peter Thiel. “Peter Thiel” by jdlasica is licensed under CC BY 2.0

Palantir Sued Over Controversial Founder Privileges

A Palantir Technologies Inc. shareholder sued Peter Thiel and its other two founders in Delaware Chancery Court on Thursday, claiming they made themselves “corporate emperor for life” through charter provisions that make investor votes “magically appear and disappear” on demand.

“The founders decided to completely untether voting power from equity ownership” by providing that their shares always control 49.99% of the vote, no matter how much of Palantir they own, the complaint says. “This power grab stretches the flexible bands that keep Delaware law in balance beyond their breaking point.”

More here.

So even if the founders sell their shares, as they have been doing, they control approximately half the company’s votes no matter what. Got only half as many shares as before because you cashed out? No problem! We’ll just give you twice the votes!

Extreme levels of founder control proved a disaster in the case of WeWork, and the same could happen here. On principle, I wouldn’t want to own shares in a company that will never give me or my fellow stockholders any control. And even Adam Neumann didn’t get to keep his votes if he sold his shares.

Note that these provisions continue until the last of the three founders dies. The youngest is 37, so it’s basically a lifetime privilege.

It’s incredible that not only did they create such a bizarre voting structure to deprive shareholders of any say, they’ll defend it in court with shareholder money. On the other hand, if they can’t vote you out, why not? This along with losses every single year of its 18 year existence are enough to keep me far away from this stock.

For more on Palantir, check out these posts:

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Photo: Palantir co-founder Peter Thiel. “Peter Thiel” by jdlasica is licensed under CC BY 2.0

Palantir’s CEO Is Spending Time Critizing Wall Street, Rather Than Making Money

Palantir Technologies, Inc. CEO Alex Karp had some sharp words for Wall Street recently:

“We told the Wall Streeters that we will focus on building the long-term health of our company, that we are going to invest in our product development and in our clients, and you just have to battle it out with them,” said Karp, also a Palantir co-founder. The developer of data analysis software went public via a direct listing in September after nearly two decades as a private company.

Not everyone on Wall Street has such a short-term focus, Karp acknowledged. Nevertheless, he said it remains “one of the most destructive, corrosive attributes of an otherwise interesting and largely functioning system.”

Is 18 years short term? That’s how long Palantir has been in business, and it’s never made a profit. Google and Amazon built businesses for the long term as well, but they reached profitability far sooner. Amazon took seven years and Google took just three.

I suggest that Karp stop wasting time criticizing Wall Street and start focusing on making his company spit out some cash for shareholders.

For more on Palantir, check out these posts:

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Photo: Palantir co-founder Peter Thiel. “Peter Thiel” by jdlasica is licensed under CC BY 2.0

Palantir’s Hidden Risk: 20% of Its Commercial Business Is a Single Customer

I came across an incredible stat while doing a little research on Palantir Technologies, Inc today:

The company has only ~125 customers despite being in the business for nearly two decades and as a result, it’s not diversified enough. Right now, the top 20 clients generate 70% of the overall revenues, while one commercial client generates over 20% of the overall commercial revenues. As a result, if a single major organization decides to cut its partnership with Palantir and look for other alternatives to utilize its data, then Palantir’s stock will likely lose significant value and its top-line performance will crumble.

20% of the commercial business is a single customer! And the vast majority of the business, both commercial and governmental, is just a few big customers. That’s a risky proposition. I do see some conflicting figures for what exact percentage of their business is their top 20 customers, but suffice it to say, it’s a very large share.

If anyone has an educated guess who that one giant commercial customer is, do leave it in the comments!

Keep in mind that this company loses $100 million a month and has never made a profit in its 18 years of existence. The common retort is that they’re scaling a business for the long term, like Google or Amazon. But those companies were profitable far sooner.

Palantir’s shares have trended downwards since I first wrote about the company last month despite its popularity with Reddit’s Wallstreetbets. A month later, the company doesn’t look any better.

For more on Palantir, check out these posts:

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Photo: Palantir co-founder Peter Thiel. “Peter Thiel” by jdlasica is licensed under CC BY 2.0

Palantir Options Are Bullish, But This Company Is Still a Dog

We are seeing strong options activity on Palantir Technologies, Inc., which is a darling of the Reddit crowd:

On CNBC’s “Options Action,” Mike Khouw said about 610,000 contracts traded in Palantir Technologies Inc on Wednesday and calls outpaced puts by about three to one. The most active calls were the 26 strike calls that expire at the end of this week.

See the full video here.

Regardless of what the options market is saying, my view on Palantir is that it’s a terrible, money losing company. It has lost money every single year of its 18 years in business, and its current burn rate is $100,000,000 a month. Other major tech companies like Amazon and Google made it to profitability much sooner, so I’m not inclined to give Palantir a break. This is one you want to avoid.

For more on Wallstreetbets, check out these posts:

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Photo: “PandoMonthly – April 2012 – Sarah Lacy Interviews Peter Thiel” by thekenyeung is licensed under CC BY-NC-ND 2.0

Palantir Insiders Are Dumping The Stock. What Do They Know That You Don’t?

The lock-up that stopped insiders at Palantir Technologies from selling their shares recently expired. And boy, are they excited!

Palantir stock sank as much as 13% on Tuesday after regulatory filings showed the company’s co-founder Stephen Cohen and two other top executives offloaded 2.7 million shares.

And they’re not the only ones:

Just a month after Palantir went public last year, CEO Alex Karp and co-found Peter Thiel sold a combined 41.45 million shares, for more than $400 million.

These sales go way beyond what it would take to have financial security or fund most any lifestyle. To me, it suggests that they think the company has gone about as far as it’s going to and it’s time to cash out.

In a company destined for greatness, you would expect to see the insiders holding onto their shares. They wouldn’t want to miss out on the amazing times ahead!

But that’s not the case here. I agree with them. Palantir is overvalued with a questionable business model and should be making money by now, 18 years since its founding. But it’s never made a dime.

The picture isn’t all bleak: a certain number of insiders are buying. But seeing these huge sales by the founders and top executives would definitely give me pause.

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Photo: “PandoMonthly – April 2012 – Sarah Lacy Interviews Peter Thiel” by thekenyeung is licensed under CC BY-NC-ND 2.0