Palantir Technologies Inc. (NYSE: PLTR) is a data analytics software company, which offers a suite of tools to allow government organizations and businesses to make data-driven decisions with its machine learning platforms.
Since the beginning of 2021, stocks from most high growth tech companies have been crushed due to rising bond yield, higher inflation and rising interest. Palantir (PLTR) is one of such stocks that got decimated.
As of 24 March 2022, It has declined 62% since the stock reached its all time high in early 2021. Many investors of the company bought the stock at near all time highs and became bag-holders since the decline.
Will Palantir (PLTR) stock return back to its all time high and beyond? With a continuing year over year growth of 30+% till 2025, and an accelerating client base expansion, the company is certainly on the right track to continue delivering strong growth. For the stock price to recover and more, the company may need to address these 3 key challenges.
Company Image
Palantir was founded almost 19 years ago. Although it has been in business for almost two decades, the company has been largely unknown to the public until after its IPO and subsequent stock price surge in 2020 and early 2021.
Many investors hold mixed perceptions about Palantir due to its complex and secretive business nature. On one hand, the company operates in the trendy field of Machine Learning offering advanced technology, which sounds very promising for the future. On the other hand, the company historically collected huge amounts of surveillance and military data to help governments make border and military decisions, which can be perceived as scary with quite a lot of political risks.
A lot of people struggle to understand Palantir’s products. Unlike Tesla or Apple, where users can easily access their products, fully understand what these products do and why they are good, Palantir’s software products are for government agencies and businesses. It’s harder for investors to evaluate the excellence of their products, simply because few people have access to them.
There are very few public-friendly showcases of Palantir’s success. They do have a number of videos uploaded to their YouTube channel attempting to share more details about their products and why they are good. But most of these videos ended up becoming convoluted tech interviews filled with technical jargons with no clear message nor conclusion. This makes its product and business value even harder to comprehend for someone who is not deep in the machine learning field.
Scaling the Business
Despite being in business for 19 years, Palantir has just over 200 customers across governments and businesses, a client portfolio that is much smaller compared to other younger B2B (business to business) data software companies. Snowflake (SNOW), for example, has over 5000 business customers, whereas CrowdStrike (CRWD)’s customer base is over 14,000.
Unlike consumer-facing software products which are often straightforward and can usually be self-taught, business-facing software is more complex in nature, especially in the data analytics field. In order for Palantir to enter the hyper growth phase and grow its customer base (and revenue) exponentially, they may need more professional sales people and consultants to broaden its market reach, pitch, educate and onboard prospective customers.
However, prior to 2020 before Palantir’s IPO, there were hardly any sales people in the company. CEO Alex Karp once said the only way he’d hire a sales team was if investors forced him to, or if he were “hit by a bus”. The company had previously never focused on turning a profit through sales, as they were focused solely on developing the best products.
The good news is, ever since late 2021, Palantir started aggressively expanding its sales force by opening over 1000 new jobs, mostly sales and marketing roles. Perhaps the company finally realized that no matter how good your products are, it means nothing if no one knows and understands them.
Competitions
Palantir at core is a data analytics software company helping customers conduct data-driven analysis and decision-making with machine learning driven software products.
Although ML (Machine Learning) is the future and will likely be embedded in most aspects of our lives (it already kind has), there are already many tech companies offering software products that more or less address similar issues using similar approaches.
From smaller companies such as SnowFlake (SNOW), CrowdStrike (CRWD) to mega tech companies like Google (GOOGL), Microsoft (MSFT) and Amazon (AMZN), all of them have products specifically designed for data-driven analysis and decision making across various industries.
With a much smaller customer base and market influence, Palantir will need to do a better job at differentiating their product offerings and competitive advantages, and help the market understand why customers should pick their software products instead of the ones owned by more established software/tech companies.