Two powerful conflicting forces drive Palantir’s share price. On the one hand, is the valuation. A market value of $170bn compares with expected 2024 sales of $2.8bn. This gives a ratio of market value to sales of over 60. When I last looked the prospective PE ratio was over 300. Value investors say this is insane and expect the shares to fall sharply to align the value with other shares.
This is an understandable point of view but not the only one. There is another powerful force affecting Palantir’s share price and that is newsflow. Yesterday the company made two important announcements. It had partnered with Pray.com (I know, only in America but it’s big business with millions of users and over 200 ministries using Pray.com to interact with their communities).
“With Pray.com’s incredible content, voiced by some of the most influential voices in faith, and our expanding global reach, we knew we needed a solution to deliver high-quality programming across multiple languages,” said Pray.com founder and CTO Ryan Beck. “I was impressed by Palantir’s reputation and their years of pioneering AI applications. Partnering with them to develop our solution felt like the right choice. We wanted to move our tech stack from a pre-AI stack to a post-AI stack, and Palantir moved us into a post-AI world.”
Palantir’s AI Platform (AIP) processes Pray.com’s audio and video transcripts and incorporates translations at the quality of native language speakers. As a result of its partnership with Palantir, Pray.com launched nine months’ worth of new product features in a few months and reduced content translation time from days to minutes, multiplied over thousands of hours of podcasts. In addition, thanks to the robustness of Palantir’s specialized AI platform, which leverages LLMs [large language models] optimised to access an authoritative, relevant and accurate internal knowledge base, this tool has become an invaluable resource for Pray.com clients.
“Palantir has enabled Pray.com to accelerate its roadmap while also giving our engineers new capabilities, building enterprise-ready AI systems at scale in half the time,” Beck explained. “Ministries and nonprofits now have access to a fully managed and highly accurate service that can translate content in their voice at a fraction of the cost. We couldn’t be more pleased with the results.”
Palantir, website, news announcement, 18 December 2024
Hard on the heels of this announcement came a further announcement that Palantir was expanding its army Vantage contract with a $618.9m contract.
Palantir Technologies Inc. (NASDAQ: PLTR) today announced that it has extended its long-standing partnership with the U.S. Army to deliver the Army Vantage capability in support of the “Army Data Platform” (ADP). The total value of this agreement is $400,746,583 for a period of up to four years, with a total available ceiling of $618,871,428.
Since 2018, the Army has leveraged Palantir’s software to transform how it uses data and artificial intelligence (AI) to more effectively perform essential missions and enable faster decision-making across the force. With an initial focus on understanding personnel readiness and combat readiness, Vantage has today become the core software system enabling ADP. ADP powers warfighters at every echelon and supports a diverse set of use cases across every data domain including readiness, logistics, recruiting, force management, talent management, financial management, risk management, and installation management.
This new agreement will operationalise data across the entire Department of the Army. The program anticipates continued growth and improvement by providing further flexibility to support additional Army programs with data and AI capabilities, fostering deeper integration and interoperability across the Department through leading technology investment.
“Palantir is proud to support the Army’s commitment to more efficient, data-driven decisions through the successful expansion of the Vantage program,” said Akash Jain, President, Palantir USG*. “Our continuous addition of new AI capabilities enables the Army’s own ability to develop applications and incorporate the benefits of effective data analysis across nearly every high-priority mission in the Army.”
*Palantir USG Inc., a subsidiary of Palantir Technologies Inc., is a leading provider of data integration, analytics, and operations software platforms to U.S. federal government agencies. The company specializes in delivering its commercial Gotham and Foundry software platforms, associated cloud hosting services, and custom analytics applications to support diverse missions across defense, intelligence, health, and civilian domains. Palantir USG Inc. leverages advanced technologies such as artificial intelligence, machine learning, and big data analytics to help government agencies make data-driven decisions, improve operational efficiency, and enhance national security.
Palantir website, news announcement, 18 December 2024
Palantir shares may be expensive but the excitement level at the business could hardly be more intense.
Palantir is a technology leader facing extraordinary opportunities. It can deliver greater effectiveness and cost savings for the US military, the rest of the government, and enterprises in the civil sector. It can do all of these things for other countries around the world. Each of those opportunities is massive; I think the group’s software sells itself. It delivers such astonishing results that to see it, at a Palantir Bootcamp, is to buy it.
Nor is the business standing still. Palantir is where it is because its software has been under development for over 20 years. It is an overnight success that took decades to create and its R&D spend climbs yearly.
It is also very scalable. Like Microsoft and other software companies, Palantir does not need factories or extra employees when it makes a sale. This means it is highly profitable, generates loads of cash and can grow rapidly.
All these factors make it hard to value Palantir’s shares. Their price has skyrocketed in the last two years as more investors have realised the scale of the opportunities. Even so, most investors have never heard of Palantir.
I would rather be in the shares than out. Investors dream of buying a share like Palantir when it is still cheap. It rarely happens. When seemingly exciting shares are cheap it is a red flag warning of hidden problems.
PLTR is a potential multi-trillion dollar business at an early stage of its growth. This is why the shares are so expensive in value terms.
Share Recommendations (19 December 2024)
Palantir. PLTR
Strategy – No Need To Buy All At Once
If you feel nervous about buying Palantir shares you could always stagger your purchases; that way share price volatility can work to your advantage. I think the outlook is so exciting I would go all in right now.