Palantir released their Q3 2021 earnings report to the market on 9th November, the results on the surface seems to show excellent top-line growth. So what do these results mean for investors we take a look at the Palantir Q3 2021 Earnings Report?
PLTR Institutions Buying Up Big!
Data obtained from Business Quant shows that Institutions are buying up a high proportion of shares outstanding in Palantir Stock.
13F institutional holdings highlight for Q3 2021 that institutional ownership is up around 9% from 23.9% to 32.23%, with over 115 new positions opened and 350 positions increased.
However, it’s pretty interesting to see that these same institutions have relatively low price targets on PLTR Stock. It seems that the insto’s may be trying to hold the price down whilst they accumulate on market, once Institutions finish accumulating a position there may be potential for a sharp increase in their price targets! let’s wait and see what they do!
PLTR Q3 2021 Earnings Headline Results
A key takeaway from the Q3 earnings report was the significantly improving cash from operations and margins. In the quarter PLTR reported Q3 cash of $101million which was an improvement of over $153 in the PCP. The group now has adjusted free cash flow conversion at over 30% of revenues.
From Palantirs Investor Relations page the group listed a number of improving business metrics including:
- Total revenue grew 36% year-over-year to $392 million
- Added 34 net new customers in Q3
- Commercial customer count grew 46% quarter-over-quarter
- US commercial revenue grew 103% year-over-year
- Cash flow from operations of $101 million, representing a 26% margin
- Adjusted free cash flow of $119 million, representing a 30% margin
- Closed 54 deals of $1 million or more, of which:
- 33 deals are $5 million or more
- 18 deals are $10 million or more
The group also revised their full-year guidance in the quarter increasing its cash flow guidance by over 33% to $400million and revenue of growth of 40% to $1.527 billion.
If you extrapolate the top-line revenue out at the guidance of 30% until 2025 you will get around $4.36billion of revenue for the year. If you were to extrapolate out the current free cash flow conversion of the company in 2023 the group may be able to produce around $750 million of FCF. (Tip run a quick DCF model on this and you’ll start seeing what we see)
PLTR Q3 2021 Financials
PLTR Q3 2021 Income Statement
In the quarter the group’s gross margin of a per cent of revenue was around 77% this is up from about 50% in the prior period. Interestingly PLTR was able to reduce their total operating expenses from 987m down to 387m. This is a metric we will be watching closely.
PLTR Q3 2021 Balance Sheet
Palantir has cash and equivalents of $2.35billion, this is up about 16% from $2.0billion as of Dec 31 2020. Total equity in the company also improved in the quarter.
Has Alex Karp Finished Selling His Options?
Another interesting point is that the question was raised in the earnings call “has Alex Karp finished his tax-loss selling of stock for the options?”
As part of the Direct Public Offering, Alex Karp was granted a large allotment of Non-Qualified Stock Options which expired at the end of 2021 (3rd Dec). When exercising the shares it appeared that Karp needed to sell stock in PLTR to cover the tax expenses of selling the options.
Whilst Karp and the other executive team still have a significant amount of options, the way these are awarded and vested are different to the current set Karp is selling. We expect insider selling pressure to reduce significantly in the coming months.
Palantir Q3 2021 Earnings Report – Prophets Take
We have previously covered Palantir stock a number of times in our articles, the stock is also a significant portion of our US-based portfolio. Alex Karp and Palantir have continuously provided revenue growth guidance of greater than 30% over the short to medium term.
|EPS||-0.05 (Q3)||-0.64 (Q2)|
We believe Palantir is significantly undervalued compared to their peers, for example, Snowflake which is similar in nature is valued at over $118billion whilst Palantir is only $42billion. Yet, PLTR has generated over 1.5x the revenue in Q3 and has EPS significantly better at -$0.05 vs -$0.64.
PLTR commercial revenue is growing at a significant rate at over 103% year over year, this means that the group by 2025 should be in a position to be generating over $4.27billion which would represent a price to sales of only 10x at the current prices.
The group are also seeming to be able to generate additional income from existing customers with the ARP top 20 customers increasing by 35%. This indicates that existing customers seem to be using the platform more and more! The group has over $3.6billion of contract value already signed as of Q3, hence the group will be able to focus on maintaining the current contracts and be able to sign additional contracts to expand this considerably.
A lot of investors seem to be scared of investing in disruptive technologies because they don’t understand it! If you wanted to take a look at the efficiencies that Palantir can offer their customers have a watch of their Demo Series Videos!
Palantir Q3 2021 Earnings Report was an impressive report in our opinion providing insight into the significant growth that investors can expect over the coming periods. The report reinforces our original investment thesis and we continue to add to our position in PLTR.NYSE!