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Stock of the week: Palantir

Stock of the week: Palantir

Palantir's Business

When a terrorist act occurs, usually the first question that arises is, “How come xyz counter-terrorist Uni / CIA didn’t know about this before?” Alongside a plethora of evidence that, in hindsight, would have prevented the attack from happening in the first place. However, you never hear about all the times that the counter-terrorist unit when they stop a crime from happening in the first place.

In essence, that is what the stock of the week tries to achieve, to stay under the radar. Before their IPO, there is a likelihood that you’ve never heard of Palantir. So what do they do exactly? Their Wikipedia states that they specialize in “Big Data Analytics,” but what does that mean?

Palantir has its origins from Cinema

We can start from the actual name – “Palantir,” which was taken from the magical Palantir in the Lord of the Rings, which were the “seeing stones” of deception. Palantir tries to “see” trends in a sea of data, which it also gathers. You have most likely never heard o them before because that was the intention (and requirement.)

At the start, most of Palantir’s customers were governments and state governments. The company was founded in 2003 by venture capitalist Peter Thiel, who is famous for his investments in Facebook and Paypal pre-IPO. Palantir came shortly after 9/11, where Palantir was pitched to government agencies as a tool that could have identified and stopped the hijackers and would prevent similar attacks from happening in the future.

By 2015, Palantir was valued at $20 Billion.

Palantir Gotham is the product that most government agencies use for counter-terrorism, the product that was initially pitched to governments in 2003. While Palantir Metropolis and Palantir Foundry have attracted companies such as hedge funds, banks, financial service firms, and other mega-firms such as Morgan Stanley, Airbus, and Fiat Chrysler.

Palantir: A good company, with an expensive valuation

Palantir: Catalysts

The main factor going for Palantir is the clientele it attracts. State and Federal Governments tend to be sticky customers; therefore, Palantir has great price power over the long term. Furthermore, their adaptation of their products to suit larger institutions broadens their marketability. Their products tend to be quite sticky, too, with little to no competition.

Palantir: Risks

Their current valuation is relatively high, considering they have been in business since 2003 and have yet to profit. Furthermore, their perk of having governments as a main customer can also be a risk, as there are not many “governments” to go around. However, this risk may be mitigated by their other offerings to companies in general if they were to push that further.

Palantir: Conclusion

A sticky business, with sticky customers at an expensive price. A good business at an expensive valuation is still a good business; however, a good business at a depressed valuation is a good buy. Palantir may be one to keep on your watchlist to buy if there are some market selloffs.