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Palantir (PLTR) Delivers Strong Growth in Q4, but Guides for a Slowdown in 2021


Adam Hejl 2021/02/16 10:18pm


Data-mining and analytics company Palantir (NYSE:PLTR) reported Q4 FY2020 results topping analyst expectations, with revenue up 40.43% year on year to $322.1 million. Palantir made a GAAP loss of $148.3 million, improving on its loss of $159.3 million, in the same quarter last year.

Palantir (PLTR) Q4 FY2020 Highlights:

  • Revenue: $322.1 million vs analyst estimates of $301.1 million (7.0% beat)
  • Gross Margin (GAAP): 78.11%, up from 48.39% previous quarter
  • Guidance for FY 2021 revenue growth greater than 30%
  • Guidance for Q1 revenue growth of 45%.

Having experience with building fraud-predicting algorithms at his previous company Paypal, Peter Thiel started Palantir after seeing US defence agencies struggle in the aftermath of the 2001 terrorist attacks. The company got its first external funding from the CIA and offers software as a service platform that helps government agencies and large enterprises use data to make better decisions.

Palantir’s technology provides customers with capabilities to gather and ingest data from almost any source in almost any format and store it in the same type of interconnected architecture that Google uses. On top of the data platform then sits a range of data analysis and visualization tools, each with specific use-cases from crime investigations, counter-terrorism operation planning over to supply chain management and financial compliance.

As you can see below, Palantir's revenue growth has been impressive over the last couple of years.

And unsurprisingly, this was another great quarter for Palantir with revenue up an absolutely stunning 40.43% year on year. But the growth did slow down a little compared to last quarter, as Palantir increased revenue by $32.73 million in Q4, compared to $37.48 million revenue added in Q3 2020. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Palantir is a bit of a special case here as a lot of their government customers require a great deal of custom work and support.

Palantir's gross profit margin, an important metric measuring how much money there is left after paying for servers, licences, technical support and other necessary running expenses was at 78.11% in Q4.

That means that from every $1 in revenue the company had $0.78 left to spend on developing new products, marketing & sales and the general administrative overhead. Significantly up from the last quarter when it was impacted by the direct listing expenses, this is a good gross margin that will allow Palantir to fund large investments in product and sales during periods of rapid growth and be profitable when it reaches maturity.

Key Takeaways from the Q4 Results

We were very impressed by how strongly Palantir outperformed Wall St’s revenue expectations this quarter and we were also excited to see that the strong revenue growth will continue in Q1. On the other hand the guidance for the next year looks a bit weaker than we were hoping for. Zooming out, we think that this was a good quarter and shareholders can feel quite positive about it. While the market has high expectations of it, we think that Palantir will continue to stand out as a compelling growth stock, although those expectations might have to tame down a bit.