Palantir: The Future Is Promising (NYSE:PLTR)

Investment Thesis

Palantir (NYSE:PLTR) is a big data analytics company, whose software is used by everyone from the world’s largest intelligence agencies to corporate clients to comb through data sets and promote effective decision outcomes. Government organizations continue to be the primary source of income for Palantir, and they rely on its Gotham operating system, which was created especially for the kind of top-secret projects these customers demand. However, the business is steadily growing the number of commercial clients it serves with its Foundry platform, its second key product.

Palantir’s shares had a difficult year in 2022, just like the rest of the tech industry. Despite rapid revenue growth, the data analytics company is still not profitable, and therefore investors aren’t thrilled. The markets are in a risk-off mode, and if a company isn’t turning a profit, investor sentiment is likely to stay subdued. Although Palantir’s business strategy is currently unavoidably expensive, the company is making headway toward profitability. Its market cap has decreased significantly enough as a result of a significant stock selloff in 2022 that it is now worthwhile to take a closer look at the business.

Source Of Future Growth

The artificial intelligence software developed by Palantir is very astounding since it enables businesses to extract previously unattainable insights from vast amounts of data. It is hardly surprising that Palantir continues to serve a significant portion of the American government. On the other hand, extending its services to the private sector is what will really create a ton of new chances for growth in the future.

Palantir is a tool that businesses may use to identify supply chain problems in advance, improving their cost and energy efficiency. With further development, AI-driven software has already proven to be a priceless resource for business and government clients and has the potential to completely transform a wide range of industries.

Growing relationships with businesses could also help Palantir repair its image among investors and the general public. From a human rights standpoint, it has engaged in a number of extremely contentious government contracts that generated unfavorable headlines and may have affected the direction of its stock price. However, as people realize that Palantir’s technology can be used for more than simply privacy violations and violence, the growth of the commercial enterprise will probably be a big success from a PR standpoint.

Palantir’s commercial customer base more than doubled in the most recent quarter, rising from 59 to 132. By 2023, if that pattern holds, it will be in a desirable situation. As Palantir systematically expands its customer base, this is an exciting accomplishment.

Another segment where Palantir could see tremendous growth in the future is the Metaverse.

The Usage Of Palantir In The Metaverse

The level of artificial intelligence in the metaverse will be beyond our comprehension. Already, organizations struggle to manage the data in their everyday operations. They receive a variety of data from clients, accounting, sales, etc.

They must also utilize machine learning to optimize and make logical sense of all this data. They must utilize artificial intelligence to ensure that their advertising is effective. They must make sense of all the decisions regarding their supply chain and logistics that must be made using this data. Data and business intelligence will fuel the evolution of the metaverse.

Palantir is an industry pioneer in artificial intelligence and machine learning. Due to its research, the advisory firm Forrester has recognized Palantir as a leader in the AI and ML markets. Due to the frequency with which these technologies are employed by metaverse developers, the corporation could be integrated into this virtual environment.

Palantir has an abundance of case studies, which is why they are becoming increasingly valuable. They have been able to solve all of these interwoven difficulties within an organization’s structure.

But these challenges are minor compared to the problems that metaverse enterprises will face, and since many of these companies will be startups, Palantir’s attempt to collaborate with startups, foundry for builders, is a brilliant idea. They are gaining hands-on experience collaborating with the next generation of enterprises that will likely construct the metaverse. While larger incumbents will play a role, emerging entrepreneurs that approach the metaverse from a different angle can act swiftly and bring products to market more effectively.

Due to the nature of data engineering in the metaverse, these businesses will have access to a great deal of information.

Alex Karp, the CEO, has been clear about his opposition to building the metaverse. He believes that there are problems on earth, and that the company should work to fix them first.

Regardless of whether or not the metaverse genuinely becomes a significant opportunity, AI and big data will determine the metaverse’s growth trajectory. Palantir, if executed properly, has the potential to play a significant role in the metaverse, and if the company has the opportunity to be part of this revolution and make some profit for its shareholders, I believe that Alex Karp might change his mind.

Profitability Might Be Around The Corner

In comparison to the same period in 2021, the company’s revenue for the first nine months of 2022 increased by 26% to $1.4 billion. As a result, despite being slower than the 44% year-over-year growth rate in the first nine months of 2021, growth is still strong despite the economic uncertainty. It was encouraging news when Palantir recently released its third-quarter statistics, showing that the operating loss margin had trended positively compared to last year. Indeed, a sizable amount of its operating expenditures are still driven by its sales and marketing activities, but investors can take comfort in the fact that this gap seems to be decreasing as a result of Palantir’s successful investment in these fields.

There is reason to be bullish despite claims of operating losses and Palantir’s alleged 13% loss margin. The operational loss margin is getting smaller when the company’s financials are examined more closely. Operating loss margin was 24% last year, but it has now been reduced by 11%, which is a significant improvement. This could be the first sign of a successful road to profitability as Palantir’s revenue increases.

Additionally, Palantir’s price-to-sales (P/S) ratio of 7 is close to all-time lows, and its strength in AI and ML research means that developers might use its technology not just for the metaverse but for other technological fields as well.

Conclusion

Shares of Palantir have performed poorly for investors this year, and the stock has even dropped below the price at which it went public. Sadly, in the bull market of 2021, such amazing revenue growth resulted in overly optimistic expectations and an inflated stock price. Since Palantir was widely seen as a symbol of the market bubble in 2020 and 2021, the stock has fallen this year.

In summary, I think the organization is in a fantastic situation. Commercial sales are increasing, losses are decreasing, and there is still plenty of room for growth for the organization. These elements, in my opinion, suggest that investors who are willing to take some risk should think about buying Palantir stock.