Palantir, what to know before you buy or sell

Buy or sell Palantir? We don't know, but read this first.

Palantir is a data mining company that offers software development products to users in order to help them manage and process data more efficiently. It has two platforms: Palantir Gotham and Palantir Foundry. The first identifies patterns in data sets that already exist, while the second helps companies collect and analyse information.

Why are investors interested in Palantir stock?

Palantir has garnered a lot of attention for both the controversial political views of its founders and its mentions on Reddit’s WallStreetBets discussion thread. Find out more about Palantir shares and what the future holds for the data processing firm.

Palantir has become popular among traders and investors due to its share price volatility in the first half of 2021.

In the months following its listing in September 2020, Palantir shares remained trading around the $10 mark. But in January of 2021, Palantir shares reached a high of $45 each thanks to consistent buzz on the WallStreetBets thread of Reddit.

As with many of the so-called meme stocks, the price rally was unsustainable, and the price fell back to below $20 by early May. Following the rise of the retail trader, Palantir’s CEO actually asked anyone with a short-term view of the stock to consider moving their focus to other companies to avoid damaging the company’s growth.

Despite the volatility, in early May 2021, Palantir had a market cap of over $37 billion.

What does Palantir do?

When Palantir was founded in 2003 it was a software developer for the US’s Central Intelligence Agency (CIA). But over the years, it has expanded and now has over 125 clients including governments and private companies. Due to its association with governments, a lot of Palantir’s operations are classified – especially any defence operations.

Palantir's relationship with the US government has been somewhat controversial. While it received praise for playing a part in the Navy SEALs locating Osama Bin Laden in 2011, it has also been used to track and deport undocumented immigrants. The company’s founder was also a supporter of Trump which didn’t carry much favour with customers or investors.

How does Palantir make money?

Palantir generated 56% of its revenue from government customers in 2020. The remaining 44% came from commercial customers.

Is Palantir profitable?

Palantir is not yet profitable. In Q1 2021, Palantir reported net losses of $123 million, compared with a loss of $54 million the year before – that’s a loss of 7 cents per share compared to 10 cents a share.

However, Palantir’s quarterly revenue had risen to $341 million from $229 million in Q1 2020. The company continues to expect annual revenue growth of 30% or more for 2021 through 2025.

What is Palantir’s business strategy?

Palantir’s business strategy positions it somewhere between a software product company and a software provider. It can use the same platform for multiple companies, rather than having to tailor the service for each new user, but it does offer some customisation. So, Palantir doesn’t have to spend a lot of time and money onboarding new customers but remains popular for its flexible interface.

The business model does mean that Palantir has to develop and maintain its products, but it can also have expenses if customers want to have a different model deployed. However, before its 2020 IPO, Palantir said it had been able to decrease the number of software engineers on its books, as well as reduce the costs associated with each of its platforms.

As the trend toward automated, artificially intelligent software booms, Palantir will be looking to increase its sales and marketing function to boost sales. In fact, some estimates suggest that Palantir’s positioning in the AI data analytics market could make it the next IBM or Microsoft.

Palantir IPO: Is Palantir public?

Palantir Technologies went public in September 2020 under the ticker PLTR. It IPO’d via a direct listing rather than a traditional offering, which means that the company didn’t raise any funds.

Instead, existing shareholders were able to liquidate their positions and give other investors a chance to get involved with the company’s future.

Who owns Palantir?

Palantir was co-founded by Peter Thiel, Alex Karp, Stephen Cohen, Joe Lonsdale and Nathan Gettings. At the time of the listing, Thiel and Karp were both made billionaires after selling a combined 45 million shares for over $400 million.

While Palantir is now a public company, the listing came with some unusual rules that meant Thiel, Karp and President Stephen Cohen would retain control over the company. The issuance of ‘Class F’ shares that mean their voting power will never fall below 49.9% – even if they sell shares or retire.