As a Palantir (NYSE:PLTR) shareholder, I couldn’t be happier with its ~35% post-earnings surge. The AI-driven data analytics and intelligence software company impressed investors, highlighting strong traction in bootcamps, growing AIP (Artificial Intelligence Platform) adoption, and improving profits. Management expects continued acceleration in its Industrial division. Throughout the meantime, Palantir is steadily turning right right right into a free money flow powerhouse.

That said, while I’ll remain invested in Palantir for its long-term prospects, I even have now adopted a neutral stance following the stock’s massive gains.

Bootcamps Driving Explosive Industrial Growth

Definitely considered one among the highlights of Palantir’s Q4 report was how the corporate was able to drive explosive growth in its Industrial division. Simply to interrupt it down a bit, Palantir’s business is split into two parts: Government (bringing in 53% of revenues) and Industrial (raking in the opposite 47%). Now, while the Government side stays to be growing reasonably rapidly, posting 11% growth in Q4, the actual excitement is brewing in Palantir’s Industrial division.

Indeed, Palantir’s Industrial division far outperformed its Government business, growing revenues by 32% year-over-year. This was driven by an infinite 55% increase in Palantir’s customer count to 221 firms. The rapid client success here might be attributed to Palantir’s implementation of a highly demonstrative customer acquisition strategy- bootcamps.

What Are Bootcamps All About?

Palantir’s bootcamps function intensive, hands-on workshops designed to showcase the capabilities of their products, particularly Palantir’s AIP.

Palantir’s strategy here literally involves cold-approaching CEOs and CTOs, urging them to position their best AI teams to the test. In Palantir’s words, such an approach often appears like this:

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Sure enough, many executives have shown interest in trying out Palantir’s platform, especially given the enjoyment Palantir has gathered contained in the tech space. The demand for these immersive “workshops” has surged in order that Palantir has not only met but surpassed previous expectations. Palantir has conducted a robust 560 sessions since October, a feat that already exceeds their initial goal of 500 throughout the span of a 12 months.

The Effect of Bootcamps on Revenue Growth

Palantir’s bootcamp strategy has played a very important role in driving revenue growth throughout the Industrial division and company-wide. The fact is, Palantir’s management highlighted that the corporate has secured significant deals through this approach. Witnessing firsthand the tangible results that Palantir can deliver for businesses, other business executives are compelled to embrace this transformative technology, recognizing it as a possibility they’ll’t afford to overlook.

Simply to call just a few, Palantir signed deals:

• Exceeding $25 million each, with

  • considered probably essentially the most vital automotive rental firms, considered probably essentially the most vital telecommunication firms, and regarded probably essentially the most vital pharmaceutical and biotechnology corporations on the planet.

• Exceeding $10 million each, with

  • an American consumer packaged goods holding company, an American automotive seat and electrical systems manufacturer, a comprehensive health network contained in the Midwest, and a large-scale battery manufacturer.

• Exceeding $5 million each, with

  • an American bank holding company, a horse racing regulatory organization, considered considered one among the world’s largest equipment rental firms, and regarded probably essentially the most vital independent non-profit cooperatives contained in the QSR space.

And these are only just a few of the examples.

The bar chart below from Palantir’s Q4 presentation clearly illustrates the success of bootcamps in driving business customer count. Specifically, on a trailing-12-month (TTM) basis, Palantir’s Industrial customer count grew by 22% quarter-over-quarter. This suggests a incredible acceleration compared with the equivalent figures of 8%, 4%, and 12% achieved in Q1, Q2, and Q3, respectively.

Given such impressive momentum in Palantir’s Industrial customer count, it’s pretty clear that Wall Street is perhaps going pricing a scenario of accelerating revenue growth inside the approaching quarters. Palantir’s management itself has substantiated this expectation by providing guidance for U.S. Industrial revenue surpassing $640 million in FY2024, indicating a growth rate of a minimum of 40%. This further reinforces the optimism surrounding the corporate’s trajectory.

Palantir: Generating Free Money Flow, but Valuation Concerns Emerge

With strong revenue growth of 20% to $608 million across Government and Industrial in Q4, Palantir is steadily having fun with improving unit economics and turning right right right into a free money flow machine.

So as in order so as to add some color regarding Palantir’s profitability overall, the corporate’s adjusted operating margin jumped to 34% in Q4, up from 22% contained in the previous 12 months. This marked the fifth consecutive quarter of expanding adjusted operating margins and the fifth straight quarter of positive GAAP net income.

GAAP net income landed at $93 million, representing a 15% margin. Yes, Palantir is now very profitable, even on a GAAP basis, and margins have only began expanding. Sure, this $93 million includes $44.5 million interest income from its $3.7 billion money position, but profits are profits, especially provided that that’s on a GAAP basis.

But let me return to free money flow, which got here in at $305 million on an adjusted basis, representing a 50% margin. Note that this figure includes $132.6 million in stock-based compensation (SBC) expenses and thus should be taken with a grain of salt. That said:

• a) Even excluding SBC, it represents an infinite free money flow margin of 25%+.

• b) It shows the acute potential for Palantir’s free money flow to grow as its overall margins expand.

• c) Total SBC actually declined year-over-year in FY2023, which is actually encouraging.

Management’s guidance, in actual fact, indicates this potential, because it expects adjusted free money flow to might be found between $800 million and $1 billion. I feel this estimate is amazingly conservative, given the undeniably incredible momentum Palantir finished FY2023 with and current margins, which is perhaps poised to handle expanding from here.

In any case, even these numbers showcase how briskly Palantir is popping right right right into a free money flow powerhouse. For context, two years ago, in FY2022, adjusted free money flow was only $203 million.

Has Palantir Stock Gotten Too Pricey?

Despite Palantir’s operational excellence, it’s hard to disregard that shares might need grow to be too pricey. At 51 times the high end of management’s adjusted free money flow guidance range for this 12 months, no further proof is required to say that Palantir is trading at an infinite premium.

While exponential growth contained in the medium term could eventually justify paying this multiple today, it’s best to expect significant volatility contained in the stock price. Attributable to the now notably thinner margin of safety compared with prior quarters, I even have modified my stance on the stock from bullish to neutral.

Is PLTR Stock a Buy, Consistent with Analysts?

The present sentiment on Wall Street appears somewhat more reserved following the stock’s massive gains. Consistent with Wall Street, Palantir Technologies encompasses a Hold consensus rating based on three Buys, five Holds, and five Sells. up to now three months. At $18.20, the on a regular basis PLTR stock price goal suggests 25.35% downside potential.

Must you’re wondering which analyst it’s best to follow if it is advisable to buy and sell PLTR stock, probably essentially essentially the most profitable analyst covering the stock (on a one-year timeframe) is Mariana Perez from Bank of America Securities, with a median return of 70.89% per rating and a 100% success rate. Click on the image below to learn more.

The Takeaway

Palantir’s Q4 performance, powered by its impactful boot camps and growing demand for its product, has propelled the stock to impressive gains. As a shareholder, I couldn’t be happier with the recent gains.

Based on management’s guidance, the Industrial division’s phenomenal revenue growth is about to rush up even further. Throughout the meantime, given the corporate’s high-margin business model, Palantir’s free money flow generation shows immense potential. I’ll proceed to carry the stock for these reasons and the proven indisputable proven fact that I see Palantir dominating the AI-powered decision-making software space.

Nonetheless, despite these positive indicators, the stock’s pricey valuation raises concerns. As a shareholder, I remain optimistic about Palantir’s long-term potential, but considering the recent surge, I even have shifted to a neutral stance, lowered my expectations, and ready for increased volatility ahead.

Disclosure