Will Palantir ever be profitable?

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TheoLeo
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Will Palantir ever be profitable?

Post by TheoLeo »

I know this is Bogleheads and not Wall Street Bets. But I feel like this topic relates to index investors as well, as we hold these unprofitable businesses in our portfolios and it is helpfull to sometimes look under the hood of an index to see what we are acually buying.

So I was reading up on Palantir. Unprofitable since 17 years. Their underpaid engineers were compensated with stock options that public investors now buy from them. My question is: why would anyone buy a stock of a company that hasn´t been profitable for 17 years and can´t provide a convincing reason on why they should suddenly become profitable? Because they say "machine learning", "big data" and "AI" a lot? As I understand it, their business is, they deploy talented engineers that help companies understand if and how they can get some use out of their data and then sell these companies a customized software that organizes and visualizes the respective data. That is what they have been doing for 17 years. What should make them profitable suddenly?

Also, as I understand it, Palantir has basically the same business model as Splunk. Since its listing 2011, Splunk grew its revenue every year by around 40 % and their net losses increased in lockstep. Despite this Splunks valuation went from 3 billion to 30 billion within 10 years.

Maybe some of you with a better understanding can help me see the path to profitability in these companies. Because otherwise, I do feel like we are in a tech bubble.
KyleAAA
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Re: Will Palantir ever be profitable?

Post by KyleAAA »

Palantir is one of the highest-paying tech companies, so I certainly wouldn't call their engineers under paid. The expectation is they will eventually earn a profit. On a cash flow basis, Palantir isn't doing too badly. Amazon didn't earn a profit for longer than that and it turned out fine. Or maybe Palantir will crash and burn. But many years without profits is not unusual for fast-growing tech companies.
quantAndHold
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Re: Will Palantir ever be profitable?

Post by quantAndHold »

I cannot possibly answer you question. For one thing, *ever* is a really long time. I will say, though, all the data gathering and mapping and visualization being done during the pandemic would seem to be tailor made for Palantir to take advantage of, but every organization that is doing any pandemic related data visualization is either using ArcGis or Tableau. Clearly, either Palentir doesn’t see that as a market they want to be bothered with, or else they’re terrible at selling into that market.
Yes, I’m really that pedantic.
columbia
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Re: Will Palantir ever be profitable?

Post by columbia »


Because otherwise, I do feel like we are in a tech bubble
No one knows if we're in a tech bubble, but what's the version of the 21st Century, where tech isn't the most important sector? The one where the gold bugs have the last laugh, I suppose.
gubernaculum
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Re: Will Palantir ever be profitable?

Post by gubernaculum »

Nope. Never.
000
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Re: Will Palantir ever be profitable?

Post by 000 »

Impossible to say with certainty, but my guess is no; however, I think the party will continue on until investors (especially in the bond market) become worried about buzzword (AI, solar, cloud, etc.) companies being able to meet expectations. If cheap and easy financing ever runs out for these companies (which could include just a generic rising interest rate environment), a lot of them will have difficulty sustaining operations.
Topic Author
TheoLeo
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Re: Will Palantir ever be profitable?

Post by TheoLeo »

KyleAAA wrote: Fri Nov 13, 2020 8:23 pm Amazon didn't earn a profit for longer than that and it turned out fine.
Thanks for your reply. If Palantir starts offering competitive cloud-computing, I see a path to profitability :D If Amazon only did online retail, they might still be in the red...
luckyducky99
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Re: Will Palantir ever be profitable?

Post by luckyducky99 »

TheoLeo wrote: Fri Nov 13, 2020 8:15 pm Also, as I understand it, Palantir has basically the same business model as Splunk.
My understanding is different. Splunk's business is largely focused on aggregation of structured and semi-structured data for analytics purposes, where the analytics are driven by people, either in real time or via automated reporting. I think Palantir is more focused on automating the analytics, like automatically connecting dots, while also including unstructured data. This is where the buzzwords like machine learning an AI come in to play. But it's been a long time since I've used Splunk. Maybe they're in that game too now?

Regardless, they could absolutely become profitable. Businesses can plow along losing money for a long time before hitting an inflection point where it just starts raining cash.
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TheoLeo
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Re: Will Palantir ever be profitable?

Post by TheoLeo »

luckyducky99 wrote: Fri Nov 13, 2020 9:07 pm
Splunk's business is largely focused on aggregation of structured and semi-structured data for analytics purposes, where the analytics are driven by people, either in real time or via automated reporting. I think Palantir is more focused on automating the analytics, like automatically connecting dots, while also including unstructured data. This is where the buzzwords like machine learning an AI come in to play.

Regardless, they could absolutely become profitable. Businesses can plow along losing money for a long time before hitting an inflection point where it just starts raining cash.
I see. I just listened to a presentation of Stephen Cohen (Co-founder) where he explicitly makes the point that the data analysis should be driven by humans because AI lacks the intuition and understanding. Also, from Palantirs website:

"WE MAKE PRODUCTS FOR HUMAN-DRIVEN ANALYSIS OF REAL-WORLD DATA
We’re focused on creating the world’s best user experience for working with data, one that empowers people to ask and answer complex questions without requiring them to master querying languages, statistical modeling, or the command line. To achieve this, we build platforms for integrating, managing, and securing data on top of which we layer applications for fully interactive human-driven, machine-assisted analysis."

Regarding your last point: I understand that companies can be unprofitable for a long time. But I feel like there should at least be a plausible way of how to get positive margins. Tesla for example is not profitable because it is building a production infrastructure. Once this is build, I can imagine they will be profitable. A 17 year old consulting and software company however, with a finished product, should be profitable by now.

From their Q3 earnings report (summed up by me):
Total operating expenses excluding R&D: 750 million
Revenue: 290 million.

So even if they had a product that wouldn´t require any more research and development, they still would be losing 460 million dollars every quarter. And since their product need costomizing and consulting, it is not like their margins should somehow improve. Seems to me that all they can do is decrease the salaries by about 50 % to make a profit...

edit: my numbers above were incorrect.
luckyducky99
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Re: Will Palantir ever be profitable?

Post by luckyducky99 »

TheoLeo wrote: Fri Nov 13, 2020 9:30 pm To achieve this, we build platforms for integrating, managing, and securing data on top of which we layer applications for fully interactive human-driven, machine-assisted analysis."
Yeah. It's the query languages / statistics thing that would be different from my (a while ago) previous experience with Splunk.
TheoLeo wrote: Fri Nov 13, 2020 9:30 pm Regarding your last point: I understand that companies can be unprofitable for a long time. But I feel like there should at least be a plausible way of how to get positive margins. Tesla for example is not profitable because it is building a production infrastructure. Once this is build, I can imagine they will be profitable. A 17 year old consulting and software company however, with a finished product, should be profitable by now.

From their Q3 earnings report (summed up by me):
Toral operating costs excluding R&D: 660 million plus 550 million in stock based compensation
Revenue: 290 million.
Yeah, that looks bad to me too. Skepticism seems fair. But I don't know anything about how to actually grow a business. That's why I do the index-thing. Shrug.
luckyducky99
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Re: Will Palantir ever be profitable?

Post by luckyducky99 »

TheoLeo wrote: Fri Nov 13, 2020 8:15 pm I know this is Bogleheads and not Wall Street Bets. But I feel like this topic relates to index investors as well, as we hold these unprofitable businesses in our portfolios and it is helpfull to sometimes look under the hood of an index to see what we are acually buying.
Despite my previous "index, shrug," I actually agree with this. But there are always going to be outliers on both sides. Overall valuations are more my jam.
SouthernFIRE
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Re: Will Palantir ever be profitable?

Post by SouthernFIRE »

Probably not on GAAP basis since their stock based comp is so high. But the company’s financials look good and continue to improve with scale.
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unclescrooge
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Re: Will Palantir ever be profitable?

Post by unclescrooge »

TheoLeo wrote: Fri Nov 13, 2020 8:15 pm Maybe some of you with a better understanding can help me see the path to profitability in these companies. Because otherwise, I do feel like we are in a tech bubble.
I don't know if we are in a bubble yet, but if you look at the P/E ratios for VUG (Vanguard growth ETF) is 34 and VTV (Vanguard value ETF) it's 17.

One part of the market is either very expensive, or another part is very cheap. 🤔
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TheoLeo
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Re: Will Palantir ever be profitable?

Post by TheoLeo »

SouthernFIRE wrote: Fri Nov 13, 2020 9:50 pm Probably not on GAAP basis since their stock based comp is so high. But the company’s financials look good and continue to improve with scale.
If I read it correctly, they cover 85 % of their operating expenses with stock based compensation. They either have to start borrowing soon or dilute the shares. Both isn´t good for shareholders.

Which financials are improving? The operating margin went way more negative than Q3 2019. They seem to hold more cash now, but it must come from somewhere that is not their operations.
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TheoLeo
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Re: Will Palantir ever be profitable?

Post by TheoLeo »

unclescrooge wrote: Fri Nov 13, 2020 9:54 pm I don't know if we are in a bubble yet, but if you look at the P/E ratios for VUG (Vanguard growth ETF) is 34 and VTV (Vanguard value ETF) it's 17.
One part of the market is either very expensive, or another part is very cheap. 🤔
My hunch would be that both parts are historically expensive if you consider expected earnings growth (or loss) and risk of bankruptcies.
langlands
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Re: Will Palantir ever be profitable?

Post by langlands »

TheoLeo wrote: Fri Nov 13, 2020 9:01 pm
KyleAAA wrote: Fri Nov 13, 2020 8:23 pm Amazon didn't earn a profit for longer than that and it turned out fine.
Thanks for your reply. If Palantir starts offering competitive cloud-computing, I see a path to profitability :D If Amazon only did online retail, they might still be in the red...
Although I think you're being a little glib, there's a lot of truth in this. It's possible we're in a tech bubble, but there have been a lot of examples of tech companies that were thought to be bubbles and ended up growing gracefully into their valuation. Unlike most traditional companies that are defined by a service or product, a lot of the most ambitious tech companies are really just a combination of human talent + tech stack + efficient and effective organizational structure. This is a really flexible and powerful thing. It's what allows an online book store to get into cloud computing or a search engine to get into self driving cars. It is this ability of certain tech companies to continuously innovate in ways that are not easily predicted by investors that gives them the sky high valuations.
regularguy455
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Re: Will Palantir ever be profitable?

Post by regularguy455 »

I saw their technology 2 years ago as part of a corporate review process. Their platform was significantly more advanced than anything else we saw (and it was priced accordingly).

The real question is how many companies buy a Cadillac when a Buick will serve their needs at 1/3 the price?
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TheoLeo
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Re: Will Palantir ever be profitable?

Post by TheoLeo »

langlands wrote: Fri Nov 13, 2020 10:28 pm Although I think you're being a little glib, there's a lot of truth in this. It's possible we're in a tech bubble, but there have been a lot of examples of tech companies that were thought to be bubbles and ended up growing gracefully into their valuation. Unlike most traditional companies that are defined by a service or product, a lot of the most ambitious tech companies are really just a combination of human talent + tech stack + efficient and effective organizational structure. This is a really flexible and powerful thing. It's what allows an online book store to get into cloud computing or a search engine to get into self driving cars. It is this ability of certain tech companies to continuously innovate in ways that are not easily predicted by investors that gives them the sky high valuations.
Very interesting way of putting it. Thanks. So what made investors in the 2000s at some point lose their confidence in these kind of companies?
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Re: Will Palantir ever be profitable?

Post by langlands »

TheoLeo wrote: Fri Nov 13, 2020 10:52 pm
langlands wrote: Fri Nov 13, 2020 10:28 pm Although I think you're being a little glib, there's a lot of truth in this. It's possible we're in a tech bubble, but there have been a lot of examples of tech companies that were thought to be bubbles and ended up growing gracefully into their valuation. Unlike most traditional companies that are defined by a service or product, a lot of the most ambitious tech companies are really just a combination of human talent + tech stack + efficient and effective organizational structure. This is a really flexible and powerful thing. It's what allows an online book store to get into cloud computing or a search engine to get into self driving cars. It is this ability of certain tech companies to continuously innovate in ways that are not easily predicted by investors that gives them the sky high valuations.
Very interesting way of putting it. Thanks. So what made investors in the 2000s at some point lose their confidence in these kind of companies?
Well admittedly I was painting a rosy picture of what the best tech companies do to justify their valuations. Naturally many don't live up to their valuations and end up crashing and burning. By 2000's I assume you mean the 2000 tech crash? A lot of those internet companies were simply overvalued- anything with a .com in its name skyrocketed. Software as a business is now much more mature and I don't think investors are repeating the 2000 mistake all over again. It's possible we're in a bubble again, but it won't be for the same 2000 reason. It would be for instance that investors overestimate the innovativeness of tech entrepreneurs and engineers. That rather than tech bringing us into a new digital revolution analogous to the industrial revolution, the digitization of our economy has in fact reached its limit.
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Re: Will Palantir ever be profitable?

Post by luckyducky99 »

regularguy455 wrote: Fri Nov 13, 2020 10:42 pm The real question is how many companies buy a Cadillac when a Buick will serve their needs at 1/3 the price?
Fed govment.
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Re: Will Palantir ever be profitable?

Post by pseudoiterative »

Let's do an incredibly crude analysis of Palantir without any understanding of how the company's business actually works. We're going to estimate when Palantir will start generating a positive operating income. Let's ignore net income and focus on the simpler task of putting together a basic model of the operating income.

Assumptions:

A1. Palantir's annual revenue for year t, rev(t), will grow at a constant growth rate over the next few years: rev(t+1) = (1+g) * rev(t), where g is some constant growth rate.
A2. Palantir's operating income and revenue obey the relationship op_income(t) = (1-a) * rev(t) - b , where b > 0 represents fixed costs, and a > 0 describes how variable costs scale (e.g. a = 0.3 would mean generating revenue of $100 requires $30 of variable costs)

From these assumed equations we can estimate a forecast for Palantir's operating income once we estimate values for g, a and b. We can see from Palantir's financial reports what the reported revenue and operating income was for the 2018 and 2019 reporting periods, and the interim estimate for the current reporting period:

Code: Select all

                            2018     2019     TTM
                            ----    -----    -----
Revenue (Mil)                595      743      901
Operating Income (Mil)      -623     -576     -461
source: https://www.morningstar.com/stocks/xnys/pltr/financials

To estimate the revenue growth rate g, we can try looking at what the growth rate was in the last few years: 743/595 = 1.25, and 901/743 = 1.21 . So in the trailing years it seems like g was a bit higher than 0.20 . Let's make the working assumption that Palantir can continue to grow revenue at a growth rate of 0.20 aka +20% for the next few years.

To estimate the parameters a and b for the cost structure, we can perform linear regression (in excel or your favourite statistical software package), treating operating income as the dependent variable, as a function of revenue. If we include a constant term in the line we're fitting we can interpret that constant term as the fixed-cost part of the operating cost structure. When I fit a linear model in my spreadsheet program, I get something that can be rearranged into the following equation:

Code: Select all

op_income(t) = (1 - 0.45) * rev(t) - 967
So we can interpret this as Palantir having a cost structure where there are b=$967m of fixed costs that don't scale according to revenue, and a variable cost / revenue ratio of a = 0.45, that is, it takes $45 of variable costs to generate every $100 of revenue.

If we use our estimate for the revenue growth rate g to forecast a few future years of revenue, we can use the above estimated relationship for operating income as a function of revenue to forecast when operating income could go positive:

Code: Select all

                         op      est. op
year       g     rev    income    income
----    ----    ----    ------   -------
2018             595    -623      -640
2019    1.25     743    -576      -558
2020    1.21     901    -461      -471
2021    1.20    1081              -372
2022    1.20    1297              -253
2023    1.20    1557              -111
2024    1.20    1868                61
2025    1.20    2242               266
The "rev" column, revenue, has our forecast values filled for years 2021 -- 2025. Similarly the "est. op income" column has our estimated values for operating income based on the equation we fit earlier. The estimates for trailing years 2018--2020 are included so we can compare them against the actual reported numbers for operating income.

So, provided you have faith in the assumptions and our crude modelling approach, we forecast Palantir will be running at an operating profit sometime during 2024!

The next exciting question could be: is Palantir likely to have enough cash to stay solvent while continuing to run at an operating loss for the next few years until they start generating an operating profit, or will they need to raise more cash to extend their runway by selling more equity or taking on debt?

p.s. this isn't intended to be the basis of a serious attempt to value Palantir, but hopefully it's a reasonable example of "what's the dumbest simplest thing we could do to estimate when Palantir might be profitable" based on public financial reports and with no understanding of how the business actually works - the causal factors underlying revenue growth and operating income.

From my perspective there are a few red flags: the company has never demonstrated an ability to be profitable, it isn't obvious that revenue growth in the future will follow the same pattern as the past, we only have 2 full years of historical financial to work with -- whereas established public companies will have 10+ years of data.
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TheoLeo
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Re: Will Palantir ever be profitable?

Post by TheoLeo »

pseudoiterative wrote: Sat Nov 14, 2020 2:42 am Let's do an incredibly crude analysis of Palantir without any understanding of how the company's business actually works. We're going to estimate when Palantir will start generating a positive operating income. Let's ignore net income and focus on the simpler task of putting together a basic model of the operating income.
Thanks for the analysis :thumbsup When looking at 2018 to 2019 you see the margin improving and revenue going up. This can be, like you suggested, due to a cost structure, where the expenses that increase with revenue (the true cost of revenue, like paying the engineers doing the consulting on site but also the marketing) are generally lower than the revenue. This way, increased revenue automatically improves the operating margin, if the other, non-revenue driving costs, stay constant. And thats plausible from 2018 to 2019. However, in the previous 17 years, this somehow wasn´t possible. And, comparing the first nine months from 2019 to the first 9 months 2020 in the actual report, you can see the operating margin actually turning a lot more negative again despite a massive increase in revenue.
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Re: Will Palantir ever be profitable?

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PuddlesTheDuck
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Re: Will Palantir ever be profitable?

Post by PuddlesTheDuck »

BogleFan510 wrote: Sat Nov 14, 2020 9:14 am Agree that this may not be a super profitable space for shareholders, but great for company executives.
You have no idea how true that is. Palantir was famous for burning money. Like "fly the IT guys back and forth between London and New York to test United's WIFI" kind of burning money. Or "run your team from DC but have everyone live in New York so they have to travel down and stay in a hotel every week" kind of burning money. These probably end up on financials under sales or something, but it's just excessive spending for no reason other than to get people status on airlines.

They're products are pretty good from what I've seen, but company culture will likely be the thing keeping them from profitability. They also seem to have lost any advantage in government they may have had, as Anduril has been making some news there. Shareholders need to hope that they get their act together now that they're public, but those class F shares make that pretty unlikely.
SouthernFIRE
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Re: Will Palantir ever be profitable?

Post by SouthernFIRE »

TheoLeo wrote: Fri Nov 13, 2020 10:15 pm
SouthernFIRE wrote: Fri Nov 13, 2020 9:50 pm Probably not on GAAP basis since their stock based comp is so high. But the company’s financials look good and continue to improve with scale.
If I read it correctly, they cover 85 % of their operating expenses with stock based compensation. They either have to start borrowing soon or dilute the shares. Both isn´t good for shareholders.

Which financials are improving? The operating margin went way more negative than Q3 2019. They seem to hold more cash now, but it must come from somewhere that is not their operations.
No, their operating margin improved if you back out one-off costs related to the direct listing. Gross margins improved substantially. Lots of momentum in the government business. 52% revenue growth off a large base.
ericcohen
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Re: Will Palantir ever be profitable?

Post by ericcohen »

quantAndHold wrote: Fri Nov 13, 2020 8:25 pm I cannot possibly answer you question. For one thing, *ever* is a really long time. I will say, though, all the data gathering and mapping and visualization being done during the pandemic would seem to be tailor made for Palantir to take advantage of, but every organization that is doing any pandemic related data visualization is either using ArcGis or Tableau. Clearly, either Palentir doesn’t see that as a market they want to be bothered with, or else they’re terrible at selling into that market.
Palantir is very much experiencing tailwinds from COVID. I suspect that is partly why it’s stock price is up 66% in the last month. And why, if you think COVID will get worse before it gets better the stock is a buy, and why Soros recently purchased 18 million shares. They’ve inked deals with the CDC, NIH, British government and other governments around the world related to COVID. For example:

Palantir providing U.S. government with coronavirus tracking software

https://www.wsj.com/articles/palantir-t ... _body_link

In addition to the work they are already doing for the British government on COVID, PLTR software considered for U.K. contact tracing program

https://www.bloomberg.com/news/articles ... government

From that Bloomberg article:

“Palantir already aids governments in more than a dozen countries with data analysis on the coronavirus pandemic. The company’s software aggregates reported cases, tracks the distribution of medical equipment and predicts future hot spots.”

:sharebeer
regularguy455
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Re: Will Palantir ever be profitable?

Post by regularguy455 »

luckyducky99 wrote: Fri Nov 13, 2020 11:28 pm
regularguy455 wrote: Fri Nov 13, 2020 10:42 pm The real question is how many companies buy a Cadillac when a Buick will serve their needs at 1/3 the price?
Fed govment.
Absolutely. To be fair, the stakes are much larger for government institutions than most mega corps. But it pays for a lot of lobster lunches :wink:
atdharris
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Re: Will Palantir ever be profitable?

Post by atdharris »

I bought a little myself - 1% of my total portfolio. What they do is interesting. I am not sure I will make what I did off the Pinterest IPO (up 195% so far) but we'll see
ericcohen
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Re: Will Palantir ever be profitable?

Post by ericcohen »

Correction: up 95% in the last month.

:sharebeer
cogito
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Re: Will Palantir ever be profitable?

Post by cogito »

The open question of the last decade is whether companies ever need to actually become profitable at all, ever.
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Re: Will Palantir ever be profitable?

Post by tooluser »

cogito wrote: Mon Nov 23, 2020 9:45 pm The open question of the last decade is whether companies ever need to actually become profitable at all, ever.
All organizations are run primarily for the benefit of their leaders.
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Re: Will Palantir ever be profitable?

Post by bluerafters »

I just wish my YT feed would stop being spammed with vids: Palantir 10X!
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TheoLeo
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Re: Will Palantir ever be profitable?

Post by TheoLeo »

ericcohen wrote: Mon Nov 23, 2020 9:10 pm Correction: up 95% in the last month.

:sharebeer
Like every ponzi scheme, this too can run out of fools that buy it with the hopes of selling it to a greater fool. We just don´t know when this will be. It is a reasonable trading strategy to try to ride the momentum of these hype stocks, but it is not investing. And eventually, what gamblers in these stocks will have accomplished, is a redistribution of wealth from the last group of buyers to the early adopters and especially to Thiel and Karp. Of course this assumes that investors at some point expect companies to be profitable. If, however, we can, after a ten year bull market, afford to now hold and trade stocks as fancy collectables like Bitcoin, then Palantir, Uber, Lyft, Splunk, Slack, Nikola, recent SPACs of all kinds, Pinterest, Snap etc may grow its stock price without limits.

What might be critical for these story stocks to continue to rise, is that they keep developing the story so far out into the future that people don´t lose hope and anything can be justified. Tesla will have a fleet of autonomous robo taxis that will make tesla car owners millionaires while they are sleeping and therefore each Tesla will be sold for hundreds of thousands of dollars. Virgin galactic will transform into a hypersonic travel airline and plane manufacturer and will operate space hotels. Palantir is too important to disclose what they are actually doing, but we can assume they do the most important thing in the world (i.e. making bar graphs out of data). And so on.
ericcohen
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Re: Will Palantir ever be profitable?

Post by ericcohen »

TheoLeo wrote: Mon Nov 23, 2020 11:23 pm
ericcohen wrote: Mon Nov 23, 2020 9:10 pm Correction: up 95% in the last month.

:sharebeer
Like every ponzi scheme, this too can run out of fools that buy it with the hopes of selling it to a greater fool. We just don´t know when this will be. It is a reasonable trading strategy to try to ride the momentum of these hype stocks, but it is not investing. And eventually, what gamblers in these stocks will have accomplished, is a redistribution of wealth from the last group of buyers to the early adopters and especially to Thiel and Karp. Of course this assumes that investors at some point expect companies to be profitable. If, however, we can, after a ten year bull market, afford to now hold and trade stocks as fancy collectables like Bitcoin, then Palantir, Uber, Lyft, Splunk, Slack, Nikola, recent SPACs of all kinds, Pinterest, Snap etc may grow its stock price without limits.

What might be critical for these story stocks to continue to rise, is that they keep developing the story so far out into the future that people don´t lose hope and anything can be justified. Tesla will have a fleet of autonomous robo taxis that will make tesla car owners millionaires while they are sleeping and therefore each Tesla will be sold for hundreds of thousands of dollars. Virgin galactic will transform into a hypersonic travel airline and plane manufacturer and will operate space hotels. Palantir is too important to disclose what they are actually doing, but we can assume they do the most important thing in the world (i.e. making bar graphs out of data). And so on.
Haha. If you don’t know about their business or think that their business consists of making bar graphs out of data, you haven’t done much research about the company. The oft repeated “but they haven’t made a profit in 17 years” is misleading. From 2003-2008 they were working almost exclusively for the cia plowing money into R and D to develop a prototype of what ultimately became Gotham. Foundry came on line 7 years later in 2015. As a 17 year old company they just grew 50% yoy. The next national intelligence director was a consultant for palantir. Lol. I think it’s a once in a decade opportunity. When you back out their stock compensation expenses, they are profitable. That is not to discount how extraordinarily (and possibly exorbitantly) large their sbc is, but it is to say that clearly they are prioritizing growth (attracting top engineering talent) over immediate profit. That is what growth companies do. You also said their engineers are under compensated and were immediately corrected with the fact that just the opposite. Now you are likening the company to a “ponzi scheme”. You clearly have some sort of weird axe to grind.

You are the type of person that was complaining about amzn’s “PE ratio” when it IPOd.
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3CT_Paddler
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Re: Will Palantir ever be profitable?

Post by 3CT_Paddler »

quantAndHold wrote: Fri Nov 13, 2020 8:25 pm I cannot possibly answer you question. For one thing, *ever* is a really long time. I will say, though, all the data gathering and mapping and visualization being done during the pandemic would seem to be tailor made for Palantir to take advantage of, but every organization that is doing any pandemic related data visualization is either using ArcGis or Tableau. Clearly, either Palentir doesn’t see that as a market they want to be bothered with, or else they’re terrible at selling into that market.
Data visualization via web maps is done primarily through ESRI (aka ArcGIS) or open source solutions and low cost solutions like Tableau and PowerBI. It is a low margin business. The money to be made would be in specific platforms that address business problems.

My hunch is that selling secret sauce in this space is going to limit your potential customers to a few large fish (feds, some states and some mega corps). Providing solutions has more to do with understanding the organization and its pain points than it is about a secret sauce tech.
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TheoLeo
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Re: Will Palantir ever be profitable?

Post by TheoLeo »

ericcohen wrote: Tue Nov 24, 2020 10:42 am Haha. If you don’t know about their business or think that their business consists of making bar graphs out of data, you haven’t done much research about the company. The oft repeated “but they haven’t made a profit in 17 years” is misleading. From 2003-2008 they were working almost exclusively for the cia plowing money into R and D to develop a prototype of what ultimately became Gotham. Foundry came on line 7 years later in 2015. As a 17 year old company they just grew 50% yoy. The next national intelligence director was a consultant for palantir. Lol. I think it’s a once in a decade opportunity. When you back out their stock compensation expenses, they are profitable. That is not to discount how extraordinarily (and possibly exorbitantly) large their sbc is, but it is to say that clearly they are prioritizing growth (attracting top engineering talent) over immediate profit. That is what growth companies do. You also said their engineers are under compensated and were immediately corrected with the fact that just the opposite. Now you are likening the company to a “ponzi scheme”. You clearly have some sort of weird axe to grind.

You are the type of person that was complaining about amzn’s “PE ratio” when it IPOd.
The thing is, I actually am the kind of person that can easily fall for these hypes. But when I feel like someone is trying to trick me out of my money, it does make me want to grind an axe. I opened this thread to see if someone can defend the 30 billion valuation of Palantir, so that people like me can read it and have a better idea of wether this company is a good investment or just a cool story.

Regarding the salary of their engineers. I´ve read some threads on quora discussing salaries at palantir and from what I could read there, they seem to cap the base pay at 127 000 dollars per year for software engineers and add stock options on top of that. You tell me if 127 000 dollar per year plus stock options in a business thats chronically operating at a loss is a good salary for an elite software engineer.

Regarding their profitablility when stock options are excluded. Why would you exclude stock options in the first place? If you are a shareholder, paying the employees with stocks options is equivalent to paying them with cash.

Regarding them creating bar graphs. The main shtick of Palantir is to present data in a way that eventually allows non technical users to interpret them easily. I assume mostly by creating bar charts, pie charts, drawing colorfull arrows. I would be interested to hear about the advanced solutions they offer. If you know, please share. Karp keeps mentioning the example of how Palantir software can help manufacturers find out which part of a machine might break soon and might need to be replaced so the company can prepare in time. Manufacturers have always stress tested their parts. They know exactly what kind of longevity can be expected from it. No need for Palantir here. All that is needed is the appropriate experimentel set up and an excel sheet.

Regarding their growth. Any business can grow if it has enough funding. It doesn´t mean much.
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Re: Will Palantir ever be profitable?

Post by ericcohen »

Ok whatever you say, chief.
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dziuniek
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Re: Will Palantir ever be profitable?

Post by dziuniek »

The question should be:

- can PLTR share price keep growing even if the company is not profitable?

The last several years of this market says yes...
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ericcohen
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Re: Will Palantir ever be profitable?

Post by ericcohen »

Correction: up 20% today and ~170% or so the last month.

Not bad for a company that mostly creates pie charts, bar graphs and colorful arrows.

:beer
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Re: Will Palantir ever be profitable?

Post by TheBeanCounter »

I bought shares at 10.70 (purely because I think Peter Thiel is a genius and it is an interesting, mysterious company. I also like that the name is a tolkien reference) and am astounded at the recent climb. It confirms Ben Graham's idea that the market is a voting machine in the short run. Palantir has gained nearly 35 billion in market cap in the last month. Craziness.

I've heard Bezos tell his employees something along the lines of "don't feel 30% more intelligent when the stock climbs 30%, because you will have to feel 30% less intelligent when the stock falls 30%". I am keeping that in mind as I watch this crazy growth.
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Re: Will Palantir ever be profitable?

Post by ericcohen »

Beancounter: it has been an amazing two months (and for me, more: this company was my first pre ipo investment). Honestly I’m hoping to see things settle down a bit and build a base for a while.

Since you’re a Thiel fan, have you invested in his SPAC, Bridgetown Holdings? I’ve invested a not insignificant for me amount into this SPAC and am waiting patiently.
TheBeanCounter
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Re: Will Palantir ever be profitable?

Post by TheBeanCounter »

ericcohen wrote: Wed Nov 25, 2020 2:28 pm Beancounter: it has been an amazing two months (and for me, more: this company was my first pre ipo investment). Honestly I’m hoping to see things settle down a bit and build a base for a while.

Since you’re a Thiel fan, have you invested in his SPAC, Bridgetown Holdings? I’ve invested a not insignificant for me amount into this SPAC and am waiting patiently.
Congrats on getting in early and it working out, to this point! I wouldn't mind it settling down either, but if it continues to go up in perpetuity I won't complain :D

I have not invested in his SPAC, I will look into it some. I guess I need to do some reading on the SPACs. From what I have seen, there are mixed opinions on them. I am a big fan of his though, and will try to learn some more.
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Re: Will Palantir ever be profitable?

Post by dmcmahon »

Now please do Snowflake?
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TheoLeo
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Re: Will Palantir ever be profitable?

Post by TheoLeo »

1,5 years later and palantir is still losing money, down 30 % from its IPO price...
hoofaman
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Re: Will Palantir ever be profitable?

Post by hoofaman »

I'm a software person and have no clue what this company does, not sure why the internet got excited about it.

Also look at this share dilution:
Palantir Technologies shares outstanding for the quarter ending March 31, 2022 were 2.036B, a 11.81% increase year-over-year.
Palantir Technologies 2021 shares outstanding were 1.924B, a 96.42% increase from 2020.
Palantir Technologies 2020 shares outstanding were 0.979B, a 69.74% increase from 2019.
Palantir Technologies 2019 shares outstanding were 0.577B, a 6.06% increase from 2018
SlowMovingInvestor
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Re: Will Palantir ever be profitable?

Post by SlowMovingInvestor »

hoofaman wrote: Thu May 12, 2022 12:44 pm I'm a software person and have no clue what this company does, not sure why the internet got excited about it.

Also look at this share dilution:
Palantir Technologies shares outstanding for the quarter ending March 31, 2022 were 2.036B, a 11.81% increase year-over-year.
Palantir Technologies 2021 shares outstanding were 1.924B, a 96.42% increase from 2020.
Palantir Technologies 2020 shares outstanding were 0.979B, a 69.74% increase from 2019.
Palantir Technologies 2019 shares outstanding were 0.577B, a 6.06% increase from 2018
Their products aren't easy to understand unless someone evaluates them thoroughly, probably under NDA.

Here is some public documentation for one of their products, Foundry

https://www.palantir.com/docs/foundry/b ... /overview/

It doesn't look too different from what several other products do - Informatica, Snowflake etc.

They also have another product called Gotham that law enforcement seems to use a lot. Even harder to say what exactly it can do. Lot of claims about their using AI/ML, but I don't know if it's just buzzwords.

My personal take is that they have a lot of government contracts, but aren't necessarily that good with private sector work. And I think their buzz, as it were, comes from the (vague) claim that their software found Bin Laden.

I admit I am skeptical of the company, even its name rubs me the wrong way :happy
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Re: Will Palantir ever be profitable?

Post by Marseille07 »

TheoLeo wrote: Thu May 12, 2022 12:28 pm 1,5 years later and palantir is still losing money, down 30 % from its IPO price...
They are cashflow positive. Their balance sheet looks red because they're compensating employees & upper management well, not because the business is in trouble.
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Re: Will Palantir ever be profitable?

Post by brad.clarkston »

langlands wrote: Fri Nov 13, 2020 11:20 pm
TheoLeo wrote: Fri Nov 13, 2020 10:52 pm
langlands wrote: Fri Nov 13, 2020 10:28 pm Although I think you're being a little glib, there's a lot of truth in this. It's possible we're in a tech bubble, but there have been a lot of examples of tech companies that were thought to be bubbles and ended up growing gracefully into their valuation. Unlike most traditional companies that are defined by a service or product, a lot of the most ambitious tech companies are really just a combination of human talent + tech stack + efficient and effective organizational structure. This is a really flexible and powerful thing. It's what allows an online book store to get into cloud computing or a search engine to get into self driving cars. It is this ability of certain tech companies to continuously innovate in ways that are not easily predicted by investors that gives them the sky high valuations.
Very interesting way of putting it. Thanks. So what made investors in the 2000s at some point lose their confidence in these kind of companies?
Well admittedly I was painting a rosy picture of what the best tech companies do to justify their valuations. Naturally many don't live up to their valuations and end up crashing and burning. By 2000's I assume you mean the 2000 tech crash? A lot of those internet companies were simply overvalued- anything with a .com in its name skyrocketed. Software as a business is now much more mature and I don't think investors are repeating the 2000 mistake all over again. It's possible we're in a bubble again, but it won't be for the same 2000 reason. It would be for instance that investors overestimate the innovativeness of tech entrepreneurs and engineers. That rather than tech bringing us into a new digital revolution analogous to the industrial revolution, the digitization of our economy has in fact reached its limit.
Sure they are it's called Crypto instead of .com this time around.
hoofaman
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Re: Will Palantir ever be profitable?

Post by hoofaman »

SlowMovingInvestor wrote: Thu May 12, 2022 6:36 pm
hoofaman wrote: Thu May 12, 2022 12:44 pm I'm a software person and have no clue what this company does, not sure why the internet got excited about it.

Also look at this share dilution:
Palantir Technologies shares outstanding for the quarter ending March 31, 2022 were 2.036B, a 11.81% increase year-over-year.
Palantir Technologies 2021 shares outstanding were 1.924B, a 96.42% increase from 2020.
Palantir Technologies 2020 shares outstanding were 0.979B, a 69.74% increase from 2019.
Palantir Technologies 2019 shares outstanding were 0.577B, a 6.06% increase from 2018
Their products aren't easy to understand unless someone evaluates them thoroughly, probably under NDA.

Here is some public documentation for one of their products, Foundry

https://www.palantir.com/docs/foundry/b ... /overview/

It doesn't look too different from what several other products do - Informatica, Snowflake etc.

They also have another product called Gotham that law enforcement seems to use a lot. Even harder to say what exactly it can do. Lot of claims about their using AI/ML, but I don't know if it's just buzzwords.

My personal take is that they have a lot of government contracts, but aren't necessarily that good with private sector work. And I think their buzz, as it were, comes from the (vague) claim that their software found Bin Laden.

I admit I am skeptical of the company, even its name rubs me the wrong way :happy
Interesting, thanks for the reply. I will say that Gotham is a great name for the law enforcement product, I'll give them that
SlowMovingInvestor
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Re: Will Palantir ever be profitable?

Post by SlowMovingInvestor »

hoofaman wrote: Fri May 13, 2022 10:52 am
SlowMovingInvestor wrote: Thu May 12, 2022 6:36 pm
They also have another product called Gotham that law enforcement seems to use a lot. Even harder to say what exactly it can do. Lot of claims about their using AI/ML, but I don't know if it's just buzzwords.

My personal take is that they have a lot of government contracts, but aren't necessarily that good with private sector work. And I think their buzz, as it were, comes from the (vague) claim that their software found Bin Laden.

I admit I am skeptical of the company, even its name rubs me the wrong way :happy
Interesting, thanks for the reply. I will say that Gotham is a great name for the law enforcement product, I'll give them that
They also have a product called Metropolis (seriously) :happy
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