D.A. Davidson Analyst on PLTR’s Recent Performance & Stock Volatility

Yeah. So Palantir may be the best company in the world. It's at least the best software company. But we've hesitated on recommending it because it's traded at very high valuations in the past. Less than a year ago, it was trading at 200 times cash flow. But here we are a year later, people have moved on to other things. And all of a sudden, a company that's doubling its cash flow this year has had the stock go down by about a third. And so now we're only trading at 50 times cash flow. That's still high. But it's more like other fast-growing software companies like Snowflake, Datadog, CrowdStrike, Shopify, who are trading at a similar multiple. But Palantir is growing twice as fast, so we thought it was time. We did a lot of work talking to their customers, their partners, spending time with the company. And we came to the conclusion that their recent success should continue.

They are adding a lot of value to their customers in delivering AI capabilities, and their customers are referring other customers to them. They have a lot of inbound interest in Palantir projects and Palantir products, and they're deploying those very well. So it's a great time. And 4th of July was just a great excuse because this is a great American company that does a lot to keep us safe.

Well, Alex Karp just went out and said that they can deliver probably 50 to 70% recurring growth rate for the next three years. So they are building a company to deliver that kind of growth. And based on the interest in their product and where AI is headed, they're in a good position to deliver that. Because I think there was a wave over the first part of the year where we thought, wait a second, Anthropic and OpenAI could just do all of this. And then a couple of things happened that made us realize, no, actually, you need somebody exactly like Palantir that goes into a company and builds a solution that can work on top of any model. Because if you build straight on Anthropic's model, let's say you started building your business on top of Anthropic's stable model. Well, a couple of weeks ago, the government pulled the plug on that model, and then the company pulled the model from the market. What would have happened to a company that would have built its solution on top of Anthropic? So now companies know, no, we need somebody like Palantir to come build a solution where if something like that happens, they can swap in an OpenAI model or even an open-source model, even better, because that's even going to be more efficient. So Palantir's role in this market, not only has it been important and they've been doing well, it's becoming more important.

We're all trying to figure out how to use AI, and most companies are at very initial stages of just trying everything to see what catches. Palantir customers are using AI already to deliver results. So they know that if they bring Palantir in, they can figure out what impact they can have on the business and implement the right AI tool in order to get those results. That requires a lot of work that a lot of traditional packaged software companies can't deliver because they don't have the professional services capability. Those forward-deployed engineers from Palantir are the secret to how they can go into a company and figure out what does the company need AI to do, and then implement that, and then help the company maintain that. So those are the things that are very unique to Palantir.