Palantir Technologies - BUY (60)

Palantir Technologies Inc. builds and deploys software platforms for the intelligence community in the United States to assist in counterterrorism investigations and operations.

It offers Palantir Gotham, a software platform for government operatives in the defense and intelligence sectors, which enables users to identify patterns hidden deep within datasets, ranging from signals intelligence sources to reports from confidential informants, as well as facilitates the handoff between analysts and operational users, helping operators plan and execute real-world responses to threats that have been identified within the platform.

The company also provides Palantir Foundry, a platform that transforms the ways organizations operate by creating a central operating system for their data; and allows individual users to integrate and analyze the data they need in one place. Palantir Technologies Inc. was founded in 2003 and is headquartered in Denver, Colorado.

Palantir's recent direct listing has catapulted the otherwise so secretive company into the limelight. Currently, there is significant institutional ownership and retail-interest surrounding the stock. Sentiment analysis conducted on Reddit and various other social medias indicate an almost bubble-like euphoria.
In order to differentiate if there is substantial fundamental value versus simple hype it is paramount to provide some historical context and where current technological trends are headed into the decade of the 2020s.

In order to understand rapid growth the stock has seen it is important to travel back in time and understand Palantir's history. Palantir, founded in the aftermath of the IT-bubble was a tech-company, primarily focused on developing tools in structurizing and organizing vast swaths of data. 

This begs the question - what is data?
Why is it so valuable and how has data-gathering changed the last 20 years?

Datais defined as;
"facts and statistics collected together for reference or analysis" according to Oxford's Lexico. The advent of the Internet and the subsequent stock mania ensuing in the late 1990s fueled a transformation in how data was collected. Large groups of the populus across the world got connected to the Internet and began sharing data.

Examples of data-collection and subsequent analysis of the data collected can be exemplified by Google Analytics. Google Analytics is used to track website activity such as session duration, pages per session, bounce rate etc. of individuals using the site, along with the information on the source of the traffic. It can be integrated with Google Ads.

So essentially, Google Analytics gathers the data surrounding visitors to sites, compiles it and presents it in a visualised format for site owners in order to provide insights as to how to improve and increase traffic to their site.

Furthermore, Google determines the popularity of a website and the subsequent place it gets in searches based on a sophisticated algorithm that takes into account search amongst a slew of other factors.

Facebook & Instagram
Facebook is another example of a company that compiles and analyses data provided by registered users. Instagram, being a subsidiary to Facebook operates in the space of photo-sharing space of users, where users can interact and follow other users depending on unique preferences.

Instagram and Facebook have developed algorithms that monitor the amount of time a user spends on certain types of content, and automatically suggests new tailored content in their timeline based on previous search history. In between posts you usually see personalised advertisements built on your search activities.

Advertisers on Facebook and Instagram are also provided with detailed metrics and visualised data on how advertisement campaigns fare in comparison with chosen metrics at the start of their original campaigns.

In other words, just as Google Analytics provides insights into the mechanical underpinnings of campaigns, social media companies are based on the same surrounding principle - which is to collect, aggregate and most critically - analyse the data.

Data, data-collection, categorisation, analysis and algorithms.
It is crucial to understand the distinction between the processes that underpin the entire chain of how modern day data is used. First, data has to come into existence, which it does via the interaction of users with specific technological media that collects it. Secondly, it has to become collected, categorised and analysed.

Analysis of data is done via algorithms today, as in the aforementioned examples of Google, Facebook and Instagram. 

Applying a top-down view, the amount of data increased the last 20 years has been due to the swift increase in Internet connectivity throughout the world, as illustrated by the International Telecommunications Union 2019 report.

Worldwide Internet users
  2005 2010 2017 2019
World population 6.5 billion 6.9 billion 7.4 billion 7.75 billion
Users worldwide 16% 30% 48% 53.6%
Users in the developing world 8% 21% 41.3% 47%
Users in the developed world 51% 67% 81% 86.6%

Breakdown by region



2017 2019
Africa       2%             10%             21.8%             28.2%      
Americas 36% 49% 65.9% 77.2%
Arab States 8% 26% 43.7% 51.6%
Asia and Pacific 9% 23% 43.9% 48.4%
Commonwealth of
Independent States
Europe 46% 67% 79.6% 82.5%

We can assuringly say in light of the self-evident data that the entire globe will be
entirely connected during the next 5-10 years, or even faster depending on global GDP-growth. The amount of data will therefore increase and the need of companies analysing data will monumentally increase.

Success will primarily lie in the sophistication and the degree of how the data is analysed. Algorithms will become more efficient and fine-tuned in terms of capturing more and more minute and delicate datapoints and variables. Machine-learning is set to become even more developed.

The adoption of 5G is set to multiple the connectivity of machines, and lead to an explosion of interacting ecosystems of devices being connected to the Internet and transmitting previously uncollectible data.

Big data has therefore a very bright future.

So what about Palantir?
Palantir is not exactly like Google nor Facebook, but its main historical focus has lied in analysing large amounts of data collected by various government agencies. It could be all from migration flows and analysing seasonality patterns, locating previously unidentified outliers. Its secret nature is attributed to the works it has conducted with intelligence agencies in analysing collected classified data.

U.S. Army Research Lab Selects Palantir Technologies Inc. for $91M Artificial Intelligence and Machine Learning Development

Dashboard for U.S. army research by Palantir

Civil agencies also utilise it, with Palantir's software being continuously used in tracking COVID-19 cases throughout the ongoing pandemic, and most recently in allocation of dosages for distribution of future COVID-19 vaccines across all U.S. states.

Palantir to Help U.S. Track Covid-19 Vaccines

COVID-19 dashboard created by Palantir for NIH

Below wee se another dashboard developed for a top 5 pharmaceutical company that links data from more than 2,000 clinical trials in Foundry to uncover trends across trials and securely analyze outcomes at a population level.

Tracking clinical trials in Palantir's Foundry for a top pharmaceutical co.

The illustrations represent the multifaceted and wide-scale use of analyzing data by the use of Palantir's software, which opens up a range of possibilities as data can be tailored to any client irrespective of industry.

This bodes very well for Palantir's future, given the environment of increasing internet connectivity and subsequent data usage worldwide as well as the increasing ecosystem of Internet of Things (IoT*).

While there is some criticism towards the scalability of Palantir, as it has to be customised to each customer, this is outweighed by the fact that customers are locked in once they are familiar with the platforms of Palantir after an extended amount of time. Furthermore, the combined prior experience of management, dating back 17 years to 2003, bodes well for tackling any future pitfalls that might arise.

Revenues and EBITDA the past years have been wildly unsteady but are set to increase as revenue growth in Q3 2020 was at whooping 57% and revenue guidance was increased to reflect a total of  $1.070 billion for FY2020.

Palantir Reports Revenue Growth of 52% in the Third Quarter, Raises Full-Year 2020 Guidance

Institutional ownership has shown tremendous interest in the company, with prominent hedgefunds such as; Point72, Blackrock, Soros to name a few. Even the Canada Pension Fund (CPP) has a stake in Palantir.

Source -

There is a likelihood, that given the experience and lock-in-effect that occurs that Palantir could enjoy an early monopoly position, that is going to be increasingly difficult to unravel due to high entry barriers that come with such an experienced and talented team that Palantir possesses. 

So the euphoria is not unwarranted, but investors should be aware that a lock-up-period is about to expire during year's end, adding additional shares to the market which could temporarily depress prices.

Besides that, East Invest is bullish on Palantir and places a solid BUY on the stock, with a share price of 60$ the next 12 months.