Palantir stock popular with retail investors and avoided on Wall Street

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Palantir recently revealed that it bought nearly $ 51 million worth of gold bullion.

DAVID GRAY / AFP via Getty Images

Palantir Technologies

is one of the world’s most original tech companies, and last week the story just got stranger than ever. But beneath the surface, there’s a weirdly compelling case for the company and the stock.

Palantir (ticker: PLTR) provides data analysis software to commercial and government clients. The 18-year-old has two main platforms: Gotham, for government applications, and Foundry, for business customers. Palantir has a long history serving the U.S. military and intelligence agencies, but lately it has beefed up its sales team to bolster its business operations. This plan seems to be gaining ground.

Palantir went public in a direct quote last September, with the shares opening at $ 10. It has since dragged shareholders into a wild ride, trading as high as $ 45 earlier this year. It is now around $ 25, still up 150% from the day of registration.

In its recently released June quarter, Palantir posted revenue of $ 376 million, up 49% from the previous year’s level. The company received a strong boost from its business activities in the United States, which grew by 90%. Palantir forecasts revenue for the September quarter to be $ 385 million and continues to forecast annual revenue growth of over 30% through 2025.

But the main story gets lost in the noise: Palantir appears to thrive on controversy. Almost everything he does is off the beaten track. Prior to last year’s stock market listing, Palantir quietly moved its headquarters to Denver from Palo Alto. The reasoning boils down to politics.

“When we founded the company in 2004, the idea was to bring world-class software to our intelligence and military communities,” Palantir CEO Alex Karp told me in an interview. in June. “Many Silicon Valley companies have refused, either openly, tacitly, or dragging their feet, to work with the US government. … I generally believe that there is a choice to be made in the world, and America has serious, tough, intelligent and sometimes ruthless adversaries.

Palantir has also done unusual things with the $ 2.4 billion in cash on its balance sheet. The company invests aggressively in PIPEs, or private investments in public stocks, which are used in almost all PSPC mergers to increase the capital raised. Palantir has committed $ 310 million to more than a dozen SPACs, or special purpose acquisition companies, according to its latest SEC filing. She made $ 33 million in equity investments in three other companies.

The most recent tranche includes $ 20 million for Fast Radius, which offers a “cloud-based manufacturing platform”; $ 15 million for Tritium, a developer of electric vehicle chargers; $ 15 million for AdTheorent, which sells adware based on machine learning; and $ 10 million for FinAccel, an Asian financial services company.

All targets have signed up to be Palantir customers. As of June 30, Palantir said it has commercial contracts with its PSPC holding companies with a potential value of $ 428 million; the contribution to revenues for the last quarter was only $ 3 million, or less than 1% of the total.

SPACs are a highly speculative place for a public company to park its cash. But I would say that Palantir’s decision to provide capital to new clients is not that different from offering vendor debt financing for hardware purchases, because

IBM

(IBM) and HP Enterprise (HPE) are doing this, or running robust venture capital programs, as are doing

Intelligence

(INTC) and

Salesforce.com

(CRM).

Even so, it makes some analysts disgusted. “While we do not object to thinking outside the box, we believe the strategy may have been taken too far, especially with software contracts which appear to be traded alongside an investment from Palantir in the same client,” Citi’s Tyler Radke wrote in a recent research note.

The out-the-box strategy goes beyond PSPCs. Last week, Palantir revealed that it bought $ 50.7 million worth of 100-ounce gold bars, a rather odd move, even for Palantir. I did a text search of the SEC database for references to gold bullion and only found references to other gold companies. The movement makes

You’re here‘s

(TSLA) Bitcoin purchases seem trivial.

The fact that Palantir decided to buy physical gold, rather than, say, the

SPDR gold stocks

ETF (GLD), makes it even stranger. Palatnir ends up looking like the corporate equivalent of an apocalyptic prepper. I tried to contact Karp to ask him about the sudden interest in gold, but Palantir refused to make it available.

An analyst who follows the company told me that the PSPC program and the foray into gold make Palantir a tough sell for institutional investors. You can see it in the shareholder base. Institutions only hold 25% of Palantir shares, against

Oracle‘s

(ORCL) 46%,

Snowflake‘s

(SNOW) 58%, and

Microsoft‘s

(MSFT) 71%.

But the same analyst is still bullish on Palantir and says it offers “a very interesting set of solutions for buyers who require scale and sophistication.”

Palantir has a fanatic following among individual investors, and the company plays for its fans. On its June quarterly earnings conference call, Palantir answered nine questions from retail investors and just four from analysts.

On traditional metrics, Palantir doesn’t come cheap. The stock is trading 25 times estimated sales in 2022. But cut the madness out, and Palantir looks like the best bet on the future of complex data analytics. There aren’t many other ways for investors to seize the opportunity and the world doesn’t get any easier or less dangerous.

Write to Eric J. Savitz at [email protected]


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