What Is The Bull Case for Palantir?
Government TAM
Palantir secured about $800 million worth of governmental deals in September this year. One of the bull cases for Palantir, which CEO Alex Karp was recently speaking on at the Reagan Defense Forum, is how the U.S military is embedded within the entire fabric of Palantir's business.
Alex Karp himself expects the TAM for Palantir to be north of $900 billion dollars. With the United States Government spending about 800 billion dollars in defense over a 12 month period, we can see roughly how he arrived at a number like that.
To gain a decent amount of that, even five or ten percent of that equates to a substantial revenue opportunity for Palantir.
10% of $800B equaling $80B or roughly a 40x from the current revenues expected ~$2B
That's a lot of money which could be coming into Palantir. The execution risks are high, but if that does happen in the next ten years, then there's a possibility to have massive share appreciation.
Scaling Contracts
Palantir embedding themselves within the government and really getting some of these important deals is crucial for this bull-case.
Palantir has managed to do it thus far, even securing a $440M deal with the CDC recently, a feat that it's not easy for a company like Snowflake or Datadog or Data bricks.
Why? Because Palantir has established a pre-existing relationship with these agencies. Accepting smaller deals at first, being given small scale tasks and over delivering. Then, as the larger and more extensive tasks begin to surface, Palantir is first on the list. Governments are cheap, they want the cheapest option, but they also need the thing to work.
So in this context, Palantir being able to get a series of deals from the government, which now in the last few months of the year have tallied in at over $1B in revenue. Of course spread out over a number of years. Solidifies the moat this company has with the government.
10 Year Investment
Not to mention, they are one of three companies to have gotten IL-6 certification, back in October.
What are the two other publicly traded companies with this level of governmental clearance you may ask? One is Microsoft and the other is Amazon. Two companies trading in the trillion dollar boys club as it pertains to market cap (although Amazon may have fallen below $1T by the time you're reading this).
Three companies on the stock exchange with this level of clearance, two trillion dollar companies and then you got Palantir, this tiny “little” $16 billion dollar company sneaking in there as well.
From a growth perspective, with a 10-year time horizon, these are the magnitude of deals that we want to see. Not only is Palantir gaining new clients, but existing clients are building out larger deals on contract expiry.
From the commercial side of things, they just got another deal with the Cleveland Clinic, set to last a decade. Followed shortly by the inking of a contract with Tampa General Hospital. They are setting up the foundation in the next ten years.
If we are right about their growth potential, for them to actually have that momentous growth that Wall Street looks at and says “hey this is a stock that we probably should own”, they will have to keep this up.
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