Emerging Public Companies: Next Amazons (Part Two of Four)
This week’s pick - Palantir - is written by John A. Nardi, host & founder of the Talkin’ Money Podcast
Palantir (Ticker: $PLTR) is an analytics company headquartered in Denver, Colorado. Its software offerings help government organizations and commercial institutions solve nuanced problems by identifying patterns in big data to make quick, accurate decisions. Palantir’s business is divided into three parts:
Gotham is used by government organizations such as the United States Intelligence Community and the Department of Defense. In real-life utility, Palantir has been credited with locating Osama Bin Laden in 2011, tracing COVID-19 infections, forecasting COVID-19 outbreaks in high-risk areas, and helping policy makers respond faster to natural disasters. The list goes on.
Foundry is used by commercial institutions to connect analytics, data, and operations, simultaneously aligning them with business objectives. Foundry redefines how data is consumed by connecting the dots between back-end data management and front-end users; data is extracted from disparate databases and synthesized into business-friendly analyses that firms can use with ease to better serve their customers.
Apollo is responsible for deploying elements of Gotham and Foundry where they are needed the most, in a manner that is also secure. Regardless of environmental constraints – public cloud, on-premise, or classified networks – Apollo allows customers to deploy Palantir software autonomously and continuously, based only on data residency requirements.
Palantir Leadership: Ignoring Wall Street Bears
What does Palantir have to do with Amazon and what similarities exist?
Palantir’s leadership jumps out. Co-Founder and CEO Alex Karp is quite a polarizing figure, much like Bezos and Musk. Karp has been questioned for what some on Wall Street considered reckless spending. In March of 2021, at an event hosted by The Executives Club of Chicago, Karp snapped back:
“We’re in this for the long haul. If you are speculating or thinking about this short-term, there are plenty of other things to invest in. We’re building the company we believe in. We’re going to do it for the long haul. There will be ups and downs. If you want something else, it’s a huge world. Buy some other stock. You don’t have to buy Palantir. Nobody’s forcing you”
Karp stated Wall Street short-sightedness to be one of the most corrosive attributes of an otherwise largely functioning system. Palantir could have cut back spending on marketing, sales, and R&D to report better numbers. It would not have made sense, however, for a growth stage company still capturing market share in a competitive industry to do so. Should Palantir leadership prioritize short-term profitability over long-term sustainable growth and value? I certainly do not believe so. Trying to please Wall Street analysts while executing long-term growth plans is a recipe for disaster.
Back when Bezos was Amazon CEO, he also came under similar fire. In 2012, Bezos was called out for “spending like a Chicago ward leader at Christmas time” when operating expenses and losses seemed out of control. In truth, Amazon was making considerable (and calculated) investments in infrastructure, R&D, and product innovations, which would pay off in spades years later. Those Wall Street bears have gone quiet on Amazon in recent years, but rumor has it that they are merely in hibernation. They will be back again to attack Amazon from time to time.
Riding the Secular Tailwinds
The best businesses solve real world problems, and they will survive – or even thrive – in times of dysphoria. Amazon delivers more than just e-commerce to customers – the company provides simplicity, convenience, speed, and customizations that have changed purchasing behaviors in the last few decades.
Likewise, Palantir has revolutionized the way businesses and government organizations mine, extract, combine, and analyze data. In an increasingly digital world, businesses are more reliant on big data analytics to establish competitive advantages. Governments around the world are fighting terrorist groups that have become more sophisticated and organized.
Below quantifies the secular tailwinds behind Palantir:
Each of Globe Newswire, PR Newswire and Allied Market Research is predicting big data analytics software market to grow at a CAGR of greater than 13% over the next decade
Banking, financial services, and insurance sectors are expected to be the largest contributors to the above trend
Even though macro sentiments are in the doldrums, Palantir will likely continue riding the big data wave to sustain growth. It has already expanded beyond the government work that first established its reputation, and its potential as a future big tech looks promising.
(John A Nardi is invested in Palantir)
Remember to type your email address below to get the next two ideas straight to your inbox
Join Consume Your Own Tech Investing to receive a welcome email with the following:
Latest Top 10 conviction Consumer and Tech positions in my portfolio
3 book recommendations on investing, consumer and technology sectors
One article delivered into your inbox every Tuesday
Preview of upcoming articles
In addition, you will receive Subscriber-Only emails with updates to my portfolio convictions and latest recommendations on books to read.
Follow me on Twitter @ConsumeOwnTech