PLTR introduced today may be the most controversial company in the current market, not one of them.
As a stock, he is the faith stock of many retail investors. Those who believe in it generally believe that its stock price can double at least ten times in the future. Catherine Wood, the president of the ARK Fund, nicknamed "the light of retail investors," continues to buy the stock, which is also highly sought after on the WSB forum; on the contrary, most analysts on Wall Street are not optimistic about its development. The average target price at the end of 2021 is still 10% lower than the current stock price.
As a company, its revenue is growing steadily and rapidly, with an annual growth rate of about 30% per year. However, the company has never achieved profitability in the past 20 years since its establishment.
As a high-tech enterprise, the company is full of various genius ideas and the top talents in the industry, but they are mostly engaged in activities that their peers despise.
So what kind of company is capable of combining slander and praise? Is he worth the investment?
Today, Mr. Meitou will take you to thoroughly deconstruct this controversial company.
PLTR's history
PLTR is a software company that provides big data analysis. It doesn’t seem surprising to listen to the business. To understand how such a software company became the most controversial company in the market, we have to start with the company’s history and business.
Since PLTR was established in 2003, it has been looked down upon by its peers since its inception. After the Internet bubble burst in 2000, Silicon Valley technology companies focused on the development of databases and Internet applications. However, PLTR did not take the usual path. It also developed data technology, but it did a spy job for the US government. Judging by a group of rebellious Internet geniuses in Silicon Valley, this is simply out of the question. The development of PLTR does not rely on the hard work of a few computers in a garage-like traditional technology innovation company. Instead, it relies on the secret investment of the CIA's secret fund IN-Q-Tel.
Soon with government funding and the efforts of a group of talented engineers, PLTR developed rapidly. It not only receives guests from the US government but also does private work for the United Kingdom, Sweden, and other countries. This has also accumulated a lot of wealth for PLTR founder, Alex Karp. But he had a life to earn but he didn't have a life to spend. Because he was doing spy work, he was often threatened with death and had to be protected by personal bodyguards 24 hours a day, so he could not live like a normal person. I think this big brother looks very much like Dr. Halliday among the top players. When I checked the information, I saw that some investors even chose to invest in PLTR because of his elegant hairstyle, which shows his personal charm.
In the eyes of many Americans, working for the government is doing bad things, but it is not necessarily true. For example, the US military locates and kills the terrorist leader Osama bin Laden, relying on the data analysis of PLTR's Gotham platform. Because the military is involved, the government has not dealt with this matter, but the possibility is very high.
PLTR is the secret weapon of the U.S. military
Many investors may not understand why PLTR always receives large orders from the government and the military? What value can they provide?
Many people think that working for the government is an undeveloped job. Here, Mr. Meitou will give you a few examples, and maybe everyone will understand.
We all know that the US government often faces domestic anti-war pressure, the most typical of which is the Vietnam War. So over the years, the number of war casualties has always been a nail in the hearts of Americans. The government also had to take care of the people's emotions and pace back and forth in the choice between counter-terrorism and withdrawal. However, the crux of the problem is not whether to send troops to kill terrorists, but how to prevent it in advance. At this time, PLTR's big data analysis system played a vital role.
The United States continues to collect information in Afghanistan and other places through drones, reconnaissance aircraft, balloons, and other equipment. Years of information collection have accumulated a lot of data. How much data is there? It takes 2400 years to watch it by yourself, day and night. Therefore, how to obtain useful value from such a large amount of data has become the key. And PLTR can process, sort, classify, and transform these large amounts of original images into valuable information through its platform, and finally judge possible threats.
For example, when a group of soldiers is patrolling outside, another group will provide technical support according to PLTR to ensure the safety of their companions. They used the floating balloon equipment equipped with various sensors such as radar and lens to observe the nearby actions in real-time without the soldiers' knowledge. By using the massive amount of information previously collected as the basis of big data analysis, they can predict in real-time and notify the commander in front of what will happen.
For example, a civilian wearing a purple hat in the distance suddenly squatted down, and the PLTR analysis system could immediately determine whether he was going to the toilet with a stomachache or was burying explosives. If there is a danger, PLTR's analysis platform will immediately issue an early warning to prevent accidents from happening. This is actually a real case, because purple is extremely unusual in this area, and PLTR marked the man based on this information and several other characteristics. After following the man for several weeks, it was determined that he was indeed a terrorist and it was discovered that he had been planting mines. Later, the nearby villagers learned of the US military's technology and ran to the US military base, wanting the US military to help see who had passed his sheep.
Some people say that with PLTR, an army commander is like having a God’s perspective, able to see everything that is about to happen. If you don't see it, it's not that PLTR can't see it, but that they don't want to see it, because it may not be important. This makes terrorists unable to avoid the fate of being positioned even if they know that they are monitored by the US military. I don't know whether PLTR's data analysis software is so amazing. But what is certain is that this software has indeed reduced the casualty rate of the US military in Afghanistan. Many soldiers were saved by PLTR without their knowledge. Therefore, the significance of PLTR to the US military is not just an auxiliary software, but an indispensable and increasingly important role in the long run.
PLTR is vital to the military, and the same is true to the government. For example, in this new crown sniper battle, PLTR also played an important role.
In the initial stage of vaccine distribution, how to distribute the limited vaccine to the places where it is most needed and to the people who need it most is the government's primary problem to solve. This task sounds easy, but it's not easy in practice. Here we must comprehensively consider various information, such as the population base of the 50 states, the interval between two injections, different vaccine brands, temperature requirements, transportation conditions, population density, severe disaster situation, ethnic age, employment status, and so on.
PLTR had a similar experience before the new crown. They have played an important role in the food distribution system, and what they do is distribute the food to the people who need it most during the shelf life. Similarly, in the process of vaccine distribution, PLTR integrates demographic information, employment status, and public health data to locate the population most in need of vaccination. Then find the bottleneck in the vaccine distribution link, and provide real-time information about vaccine inventory to the federal government's decision-making level, and finally directly give an optimal solution.
PLTR's commercial field
The early PLTR relied on the above-mentioned government and military requirements for data analysis to gain a foothold. Later, PLTR also developed a system in the civilian field.
For example, JP Morgan used PLTR's Metropolis platform ten years ago to filter out employees who are not honest in their thinking by analyzing employee communications. They analyze employee emails, download activities, company phone GPS location, and other information, use keywords and specific behaviors to analyze and predict those employees may have a decline in thinking, to take early action to ensure that the company's interests are maximized.
Sounds immoral? Indeed, I advise you to be cautious when communicating with company equipment or accounts. The system developed by other people's PLTR can even analyze what the terrorists slap their buttocks and shit, and it is hard not to be noticed if we are a little bit tricky.
In addition, PLTR has many applications in the civilian field. For example, help large power companies analyze the daily electricity consumption data, analyze which power station should work when, and realize overall energy saving. For another example, helping oil companies find oil, helping gold mining companies locate gold, and so on.
It can be seen that PLTR is not simply to help companies do better but to provide companies with a level of software.
PLTR's core competitiveness
The purpose of spending so much time on the application of PLTR is to give investors a true impression of this controversial company.
I have found that many investors will have extreme prejudice or preference for a company without knowing the full picture of the company. This is often fatal for our investment.
So next, let's talk about the core business and future development of the company PLTR. It will also give you a deeper understanding of investing in this company.
Mr. Meitou is not a data analysis expert. I will show you the information that I think helps make investment decisions, and add my own understanding.
PLTR's products are divided into two categories according to their attributes, independent software, and platform software. Independent software means that PLTR sells software customized according to customer needs for different customers. Foundry and Gotham are its flagship products. The customers of this software are often governments and large enterprises. This part of the business is characterized by a high degree of customization.
Because these major customers have unique needs, you cannot sell CIA software to BP Petroleum. Moreover, the government is the most difficult to serve. The data requires working in a highly confidential environment, and it needs to be physically isolated and not connected to the Internet. This set of things does not apply to other commercial companies.
The high degree of customization makes PLTR users extremely sticky and has a wide moat. Every time PLTR completes a product, a large number of engineers are needed behind it. To improve efficiency, they generally split a large software into hundreds of small modules, develop them in parallel, and then assemble them together. The hardest part is not the number of small modules, but the coordination and assembly of all the modules. And this is the core competitiveness of PLTR.
But then again, the high degree of customization has also led to the extremely high cost of PLTR software development, and the initial investment is huge. This naturally makes PLTR's software very expensive, which can easily cost several million dollars. According to the PLTR financial report, his average selling price for each software is 7.9 million, and the average selling price for the largest 20 customers is 33.2 million. Therefore, there are not many companies and institutions that can be used, which also limits the development of PLTR to some extent.
Perhaps PLTR is aware of this problem, so they are also actively developing platform software. The platform software Skylab and Apollo is a kind of SaaS cloud software, which makes it possible for PLTR to enter a larger market in the future and greatly increases the competitiveness of PLTR. This may become the main engine of PLTR's future sales growth.
For SaaS software, since it is shared in the cloud, the level of confidentiality is very important. PLTR is currently in the fifth tier and is already ahead of the competition. In the latest financial report, it said that it will hit the highest level, the level of confidential information. Once the development is successful, it will be the first SaaS company to achieve this goal. This technological leadership will bring more military and intelligence-level cloud sales to PLTR.
PLTR's latest earnings report
In terms of financial reports, PLTR's latest quarterly financial report is very eye-catching, with quarterly sales increasing by 40% year on year. Sales of 322 million also beat analyst expectations of 300 million.
The most important thing to pay attention to is its growth expectations. The company predicts that its revenue will grow by 30% in 2021, to 1.4 billion, and 4 billion in 2025, which is an average annual growth rate of 30%.
Since PLTR’s contracts are mostly long-term contracts, revenue needs to be shared over many years, so his income is expected to be more reliable. But 30% growth is obviously not enough to satisfy the appetite of investors. If PLTR can develop more new orders on top of existing customers, future revenue growth will likely exceed this expectation.
Regarding the risks of PLTR, we must also pay special attention. As the most controversial company in the market, the risks cannot be underestimated.
The first risk is the proportion of PLTR customers.
PLTR currently relies heavily on government orders, which currently account for 56% of its total revenue, a growth rate of 77%. Commercial orders accounted for 44%, and revenue growth was only 4%. This is obviously unqualified for a fast-growing software company. As analyzed above, although investors do not have to worry about government orders being not stable enough and growing fast enough if PLTR’s commercial business cannot expand rapidly, its company’s future development will be greatly limited and it will be difficult to sustain it. Current valuation.
The second risk is that the expansion of its commercial business is facing numerous obstacles.
PLTR's software is good, but it may be a bit too powerful if it can't stand it. In fact, most companies do not have high requirements for data analysis, and many large companies also have their own data analysis teams. Companies such as Home Depot, Coca-Cola, American Express, etc. subscribe to PLTR software and later found out that although they possessed powerful data analysis capabilities, they could not bring the corresponding increase in revenue or reduction in costs, and ultimately chose to return the product. This cost of millions of dollars at every turn will discourage even large companies with deep pockets, let alone more small and medium-sized companies.
In addition, public opinion may also become a stumbling block for the expansion of PLTR. PLTR's software often has to deal with various sensitive personal information. Although PLTR claims that they don't have any personal information, they just provide tools. But the public does not buy it. Some companies may choose to draw a clear line from PLTR under pressure from public opinion. This is also a factor that potentially hinders the development of PLTR.
The last one, and I think the biggest risk of investing in PLTR at present, is that his valuation is a bit outrageous. I admit that PLTR is an excellent company, but a good company is not necessarily a good investment. His price is really expensive, even after a recent correction. Compared with IBM, Amazon, and Microsoft, the various valuation data of PLTR are scarily high. Although their stages of development are different, they are totally unable to control such a valuation according to the company's current development speed. At the same time, PLTR did not show enough persuasive power to achieve faster growth. So we see that Citibank has given a sell rating of $15, and Morgan Stanley has also recently lowered its target price from $19 to $17. This is a manifestation of PLTR's overestimation of risks.
PLTR is indeed a good company with great potential. He has a vast market and a deep moat in the future.
On this basis, PLTR is still on the cusp of the times. They can be said to be one of the first companies to apply artificial intelligence technology. Coupled with the analysis needs of massive data brought by the popularization of 5G technology in the future, PLTR has growth potential. It's also very tempting.
However, no matter how good the company is, there is a price, and it has to be raised step by step even with high ceilings. Obviously, the speed and quality of PLTR can't support his current valuation. The risk of investment is also high.
For a company like PLTR, I myself would not choose to run naked on the stock. I can't give a short-term target price, because too many variables make it impossible to do it at all. If you believe in the company PLTR, it is best to look at this investment from a long-term perspective of 5 to 10 years. It does have a good foundation for long-term investment, but short-term uncertainty is also destined to be extremely volatile.
If you are only pursuing short-term skyrocketing opportunities, then I do not recommend starting PLTR now. With his current valuation, he must have extremely high-income growth and rapid business breakthroughs if he wants to skyrocket. However, in my opinion, these are difficult to achieve in the short term.
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