Morning Markets: Palantir is in better shape than previously expected. Let’s explore.
When we last checked in on Palantir, the big data and analytics company was expected to generate around $750 million in revenue during 2018. That figure was expected to represent double-digit growth from a reported $600 million result set in 2017.
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The two revenue figures, while large, paled in comparison to a purported $41 billion price tag that bankers floated as a possible IPO valuation for the company. We found the gap between the companies revenue and theoretical price staggering, especially given the modest 25 percent growth rate that Palantir was expected to post last year.
The company did a bit better than that, however, so it’s time to revisit our math.
According to Bloomberg this week, Palantir disclosed that it “generated almost $1 billion in revenue last year.” At $900 million in 2018 revenue, for example, Palantir’s 2018 growth rate rises to 50 percent, a doubling of its previously expected pace.
I don’t think it’s enough to get Palantir to a $41 billion valuation, but certainly enough of a change to make Palantir worth more than before.
Indeed, with $900 million in 2018 revenue, Palantir would sport a 45.6x revenue multiple, using an estimate of its last-year revenue and discussed IPO valuation of $41 billion. That’s steep before the market took a spill in December, possibly harming sentiment surrounding tech shares and technology flotations. Now it seems simply excessive.
But perhaps Palantir won’t pursue such a lofty valuation. The acceleration of its growth rate this far into scaling is impressive, and should grant the company access to either private or public capital, provided it’s willing to take a market price.
Top Image Credit: Li-Anne Dias.