Databricks AI

+++ Palantir Technologies Inc. (PLTR) - A brief analysis +++

$PLTR (+3,47 %) is a leading data analytics and artificial intelligence (AI) company characterized by its innovative technology and strong focus on safety-critical applications in both the public and private sectors. Since its IPO in 2020, Palantir has attracted both enthusiasm and criticism - not only because of the disruptive nature of its business model, but also because of its dependence on government contracts and its sometimes aggressive valuation on the stock market.

In 2024, Palantir has made significant progress, both in its financial results and by increasing its market presence in the field of artificial intelligence. However, the stock has become a point of contention as it is currently at historically high levels, while many analysts point to potential risks and overvaluation.

After Palantir has generated more than 300% returns in one year, there is such fomo in the market but also on getquin, is this justified?

1. business areas and products

Palantir specializes in providing complex data analytics to help businesses and governments make critical decisions. The company offers two main platforms:

1.1 Palantir Gotham

• Target group: Primarily governments, security agencies and the military.
• Function: Facilitates the evaluation of large, unstructured data volumes in order to detect threats at an early stage and optimize decisions in security-relevant areas.
• Areas of application: Counter-terrorism, military operations, national security.

1.2 Palantir Foundry

• Target group: Companies in various industries, including energy, healthcare and finance.
• Function: Enables integration and analysis of disparate data sources to optimize processes and make strategic decisions.
• Growth: Foundry has grown in importance in recent years as companies increasingly rely on data-driven decisions.

1.3 Apollo

• Target group: Both public and private clients.
• Function: Provides real-time AI-driven decision-making processes and ensures that Palantir's software can be continuously updated and scaled.
• Significance: This platform is considered a key product driving Palantir's expansion in the field of artificial intelligence.

2. market position and competitive environment

Palantir operates in a highly competitive market. Its main competitors include:

• Snowflake $SNOW (+0,33 %)
  : Focus on cloud-based data platforms.
• Databricks $DBRX Specialized in machine learning and big data analytics.
• Google Cloud and Microsoft Azure $GOOGL (+0,19 %) & $MSFT (-1,69 %) Also offer AI and data analysis solutions, but benefit from their broader product portfolio

Strengths of Palantir:

• Proprietary technology: Palantir develops customized solutions that are deeply integrated into customers' workflows.
• High barriers to entry: Palantir's complex and specific applications create long-term customer loyalty.
• Strong customer base: Over 60% of sales come from long-term contracts with governments and large corporations.
• Huge market: The AI market has huge expected CAGR over the next few years (and we are still at the beginning of this journey)

Weaknesses:

• Dependence on the public sector: Significant portion of revenue comes from government contracts, making the company vulnerable to budget cuts.
• High cost structure: Despite the scalability of the products, the cost base remains relatively high due to high development spend and customer acquisition.
• Share dilution: In recent years, Palantir has increased its outstanding shares by 20%

3. recent developments and strategic initiatives

3.1 New contracts and partnerships

• Contract with the US Department of Defense: Palantir was awarded a contract worth USD 36.8 million in December 2024 to support the U.S. Special Operations Command. This strengthens market leadership in the defense sector.
• Partnerships with AWS and L3Harris: These collaborations aim to extend the reach and functionality of Palantir's platforms in the military and commercial sectors.
• Healthcare sector: Palantir is working with leading pharmaceutical companies to provide AI solutions for clinical trials, drug discovery and supply chain optimization.

3.2 Artificial intelligence as a growth driver

The integration of generative AI and advanced analytics into the existing platforms has contributed significantly to the increase in sales in 2024. Customers are increasingly relying on Palantir to automate AI-driven decision-making processes.

3.3 International expansion

Palantir has strengthened its presence in Europe and Asia. The company is becoming increasingly important, particularly in the area of critical infrastructure analysis, as governments and companies arm themselves against cyber threats.

4.1 Current results (Q3 2024)

• Revenue: USD 725 million (+30% compared to the previous year).
• Gross margin: Over 80%, underlining the high scalability of the business model.
• Net result: Fourth consecutive GAAP-positive quarter, a milestone in the company's history.
• Free cash flow: Over USD 300 million, indicating strong operational efficiency.

4.2 Forecasts for 2024

• Total expected revenue: Over USD 3 billion.
• Growth drivers: Increase in government contracts, rising adoption of AI solutions and expansion in the commercial sector.

4.3 Valuation

The share is currently valued at a price/earnings (P/E) ratio of over 400, based on expected earnings for 2025 in bullish scenarios at 150. This indicates a very optimistic market expectation.

This shows that Palantir is currently valued historically (very expensive), given the status quo growth!

Here is a comparison of the dotcom ratings of well-known companies (P/S ratio) - Palantir currently has a 60 P/S ratio.

5 Valuation

With a current price of around USD 72 (as at December 2024), the share is trading well above its fair value of USD 19 as estimated by Morningstar. This could lead to sharp price losses in the event of disappointing results or negative news, but also shows how wide the discrepancy in valuation currently is!

6. fair value estimate

Based on the discounted cash flow model (DCF) and taking into account a conservative growth rate of 20%, the fair value amounts to USD 25. This estimate takes into account the long-term opportunities offered by AI, but also the risks of a potential slowdown in growth and the high dependence on government contracts, but with old valuation schemes that are not always based on growth values!

Conclusion

In my opinion, PLTR is currently historically expensive, with lower growth opportunities than other companies in the market e.g. $HIMS (+4,16 %)

For this reason, I am currently waiting for healthy profit-taking and continue to look at Palantir's business model!

👍 = I am not invested

❤ = I am invested

If this article has provided you with any added value, I would be delighted to receive a few Getquin coins :)

Snowflake Inc.: Is ❄️ melting away or growing into an iceberg?

Company profile

Snowflake Inc. is a pioneer in cloud computing, specializing in data warehousing and analytics. Founded in 2012 and headquartered in Bozeman, Montana, the company offers a cloud-native platform that enables organizations to efficiently store, process and analyze data - all from a single source.

Historical development

Since its foundation $SNOW (+0,33 %) has undergone a remarkable development. With its IPO in 2020, the company achieved the largest software IPO in history to date and consolidated its position as a leading provider of cloud-based data solutions. In the years that followed, Snowflake continued its dynamic growth and established itself as one of the key players in cloud data warehousing.

Business model

Snowflake pursues a usage-based business model that focuses on flexibility and cost efficiency. The revenue streams are divided into the following main categories:

Subscriptions to the Cloud Data Platform

Professional Services

Marketplaces

Snowpark (a developer platform)

Strategic partnerships

This model enables customers to pay only for the resources they actually use and helps them to manage their costs effectively.

Core competencies

Snowflake has several key strengths:

Scalability: Thanks to its cloud-native architecture, the platform can scale compute and storage resources seamlessly and on demand.

Performance: Snowflake offers outstanding performance for complex queries and real-time analytics, clearly setting it apart from competitors.

Data integration: The platform facilitates the efficient integration of data from a wide variety of sources and systems.

Security: Snowflake sets high standards for data security and compliance and meets comprehensive data protection requirements.

Ease of use: The platform is designed for both technical and non-technical users, ensuring ease of use.

Future prospects and strategic initiatives

In the face of growing challenges, Snowflake looks forward to an exciting future:

Product innovation: The company is continually investing in the development of new features and services to secure and expand its market position.

Market expansion: Expansion into new sectors and geographical markets is the focus of strategic planning.

Partnerships: Snowflake is further expanding its ecosystem through targeted partnerships and strengthening its market position.

Focus on AI and machine learning: With the increasing integration of AI capabilities, Snowflake aims to meet the growing need for advanced analytics.

Cost optimization: In the face of rising marketing and personnel costs, the company is rigorously pursuing a strategy to control costs and increase efficiency.

Market position and competition

Snowflake operates in a highly competitive market and competes directly with cloud giants such as $AMZN (-1,56 %) , $MSFT (-1,69 %) and $GOOGL (+0,19 %) , who each offer their own data warehousing solutions as integral parts of their comprehensive cloud ecosystems.

A particularly relevant competitor is Databricks, which - like Snowflake - focuses on modern, cloud-native data processing solutions. Although $DBRX not currently listed on the stock exchange, the company is considered a strong candidate for a future IPO and is attracting increasing attention in the industry.

Overall, the market for cloud data warehousing and analytics is extremely dynamic and highly competitive, characterized by a mix of listed tech giants, specialized companies and up-and-coming private firms. In this environment, Snowflake must assert itself through continuous innovation, differentiated product offerings and effective market strategies.

Total Addressable Market (TAM)

Snowflake's Total Addressable Market (TAM) is expected to more than double from USD 152 billion in 2023 to USD 342 billion in 2028. This development reflects the expected dynamic expansion of the market for data and cloud services in the coming years. The forecasts are based on the growing importance of data management and analysis in an increasingly data-driven economy and the ongoing migration of companies to the cloud.

Share Performance

Snowflake made its stock market debut on September 16, 2020 at an initial price of USD 120 per share. The share price rose sharply on the very first day of trading and opened at USD 245, almost double the issue price. Since then, however, Snowflake's share price has been extremely volatile. From its high, it has recorded an overall performance of -57.58% to date.

In summary, it can be said that after the initial hype and rapid price gains, the share has undergone a significant correction.

The Consumption Model

Snowflake relies on a consumption-based model in which the majority of revenue is recognized according to the extent to which customers use the platform. This model offers various advantages, but also some aspects that need to be considered:

Revenue generation

• Pros: Revenue grows faster as it is closely linked to actual customer consumption.
• To consider: Revenue is variable and depends heavily on customer usage behavior.

Pricing model based on consumption

• Pros: The model is aligned with customers' value-based costs as they only pay for actual usage.
• To consider: Improvements in platform performance may reduce customers' costs, which could impact revenue.

Contract terms for billing

• Typically in advance: Most contracts include upfront payments.
• Pros: This practice encourages faster growth.
• Pro: Bookings reflect a contractual minimum.
• Pro: A variable consumption model can provide additional revenue during the renewal cycle.
• To consider: Payment terms are dynamic and can evolve.

Further considerations

• Pros: Customers don't have to pay for unused software (known as "shelfware").
• To consider: Since the model is based on a usage-based approach, there is a possibility that revenue will fluctuate depending on customer usage.

For the development (company figures), a better view and more, check out the free blog : https://topicswithhead.beehiiv.com/p/snowflake-inc-schmilzt-das-unternehmen-dahin-oder-w-chst-es-zum-eisberg-heran

Opinion/Conclusion

Now that you have only heard negative things, the question arises as to why you should even think about the share. Let me give you a few reasons:

What was positive for the company and previous investors now makes the share price look completely crashed. The share was simply floated far too high and was completely overhyped. But the long-term trend is still behind the share.

With more and more data and the increasing migration to cloud services, Snowflake will continue to grow, especially internally. This means that sales will continue to rise steadily, and the only thing that really matters is customer migration. Proof of this is that if you take out S&G and still get revenue growth through the internal growth rate, you would immediately value the company positively. So you pay accordingly for future sales.

There are many competitors, but as is so often the case, you don't want to be dependent on the usual players. If you look at it this way, only Databricks and Snowflake remain as the main players.

The ratio of R&D to sales is just under 50%, which shows that Snowflake is determined to remain one of the market leaders and increasingly wants to offer more for its customers. The sales shortfall that this is currently creating will disappear later.

Snowflake believes this too:

"We have so many new product feature capabilities that we need to ensure the salespeople are equipped to be able to sell that. And a lot of that is sales enablement and training, and he's really deriving a lot of that. And it's very positive what I'm seeing coming out" (IR at the last meeting) or "And until we see revenue, we're not going to spend more on the COGS side. And we have a fixed amount in R&D, and that will not change. Got it. Got it. And I think Sreedhar has talked about seeing significant contribution from some of these emerging products maybe as early as next year. I mean, how should we sort of think about the pace in which these ramp up? Because on one hand, I mean, 2,500 customers is, I think, 30-40% of your install base or somewhat, which is a pretty good start considering these products are only out for a couple of quarters. Yep. So, you know, obviously, we wouldn't have built these products if we didn't think they could have a meaningful impact. And it's I'm not going to guide to it now. It's still too early to tell, but we'll definitely be talking about that in Q4 when we finish the year. Yeah. I think that's when we'll have more of an impact. Remember, a lot of these things with Cortex, there's 2 components to it. There's the GPU component to generate things, but then actually running the query is also driving a lot of data warehousing revenue as well, too, that has the higher margin. Right. And I think there's no contribution expected from these new products embedded in that. We don't have anything embedded in our guide for this year."

So we are dealing here with a fast-growing tech company that is investing heavily in the product and staff and is mainly being held back by the share price, as there is a revenue gap, an IPO that is too high and its competitor Databricks is doing very well. However, Snowflake has by no means lost touch.

I cannot predict whether the share price will continue to fall, but apart from a few minor issues, the company is doing very well and I will continue to hold on to it. This could be particularly interesting for savings plan shareholders, as you get more and more shares as the share price falls until the gaps disappear and you can concentrate on profitability.