Tesla (TSLA) and Palantir (PLTR) are two of the most talked-about companies in the stock market. Both have visionary and eccentric CEOs, innovative products that were made ahead of their time, and loyal fan bases among retail investors. With recent hype around Aritificial Intelligence (AI), companies that have mastered their art for decades like Palantir are gaining more attention, some people even say this is the new Tesla stock. But are they really comparable? And is Palantir a good investment opportunity?
Picture: Palantir. Source: Unsplash
Innovative Products
Tesla is known for its electric vehicles, battery technology, and self-driving software. It started out in 2003 and went through over a decade of difficulty before consistently making profit. At the time, electric vehicles are just purely dream as the supporting technology was not well developed. However, the company has been disrupting the automotive industry since 2014-2015, and has become one of the most valuable companies in the world since 2020. Tesla's mission is to accelerate the transition to sustainable energy and transportation. There are some popular lines from Tesla likes Tesla Model 3 or Model S.
Palantir is a software company also found in 2003 that specializes in data analytics and artificial intelligence. Even though some base theories have been studied, the underlying technology likes Transformers or GPT were not created until 2017. Thus, the automation or "smarter chatbot" that helps decision-making procedure were only seen in movie. Palantir's mission is to empower organizations to make better decisions and solve complex problems. Since the foundation, the company has went one and developed several key platforms, like Palantir Gotham and Palantir Foundry. These products enable customers to integrate, analyze, and act on massive amounts of data from various sources.
Picture: Get Things Done. Source: Unsplash
Palantir Foundry is a platform that connects data sources, models, and workflows across an organization. It allows users to create a common logic layer that harmonizes and automates decision-making. It also supports real-time collaboration between data, analytics, and operational teams.
Palantir Foundry is designed to work with existing enterprise architecture, without duplicating or fracturing the underlying assets or sources of truth. It can incorporate data and models from various systems and formats, such as databases, APIs, files, or spreadsheets. It also provides data governance and security features to ensure compliance and trust.
Palantir Foundry has been used by some of the world's most important institutions to solve critical challenges and drive value. For example, Palantir Foundry has helped utilities companies prevent wildfires, airlines optimize operations, healthcare providers improve patient care, and solar plants reduce downtime.
On the other hand, Palantir Gotham is a platform that enables defense decision making across domains and roles. It is designed to integrate, enrich and analyze data from various sources, such as sensors, databases, documents and human intelligence. Palantir Gotham can also support artificial intelligence applications, such as predictive analytics and computer vision. Thus, Palantir Gotham is not commonly used outside of military.
Eccentrics CEOs
Both companies have eccentrics CEOs, Alex Karp for Palantir and Elon Musk for Tesla. Karp is known for his unconventional style and outspoken views on topics such as privacy, democracy, and capitalism. He is also an avid practitioner of meditation and martial arts, and often wears a hoodie and sneakers to work. Karp has been described as a "philosopher-king" who leads Palantir with a strong sense of mission and purpose. From previous interviews, he was described as "cocky" or arrogant by some people.
Picture: Alex Karp. Source: Flickr.
On the other hand, Elon Musk is known for his visionary ideas and ambitious goals, such as colonizing Mars, creating a global internet network, and developing a brain-computer interface. He is also a prolific outspoken user of social media, where he often shares his opinions and jokes with his millions of followers. In fact, he shared much more controversial thoughts on Twitter after he bought out the company. Musk has been called a "real-life Iron Man" who leads Tesla and SpaceX with a passion for innovation and disruption.
Both Karp and Musk share some similarities as CEOs. They are both driven by a desire to solve some of the biggest problems facing humanity, such as terrorism, climate change, and artificial intelligence. They are both willing to take risks and challenge the status quo, even if it means facing criticism and opposition from regulators, competitors, and the public. Most importantly, they are both charismatic and influential figures who inspire loyalty and admiration from their employees and customers.
Picture: Elon Musk. Source: Wikimedia
However, Karp and Musk also have some significant differences as CEOs. They have different approaches to leadership and management. Karp prefers to keep a low profile and focus on building a strong culture and values within Palantir. He avoids the spotlight and rarely gives interviews, sharing thoughts on social media or public speeches. He delegates most of the operational decisions to his co-founders and executives, while retaining the final say on strategic matters. He values collaboration and consensus among his team members, and encourages them to challenge him and each other.
Another difference between Karp and Musk is their attitude towards their customers and stakeholders. As mentioned above about Alex Karp was an arrogant person, Karp is selective and secretive about who he works with. In the past, he only accepts clients who share his vision of using data for good, not evil. He rejects any potential customers who he thinks might misuse or abuse Palantir's technology. He also protects the privacy and security of his customers' data from unauthorized access or leaks. He does not care much about public perception or market valuation of his company.
That is true until recently, especially in 2023, Karp gave out more interviews to the likes of CNBC with a much better public appearance. He appeared to be more confidence and less arrogant. It is not clear of the reason for this shift, but it surely is a welcome change.
Popularity with Retail Investors
Palantir and Tesla are two of the most popular retail investor stocks in the market. Both companies have a visionary founder, a loyal fan base, and a disruptive potential in their respective industries. Especially during Covid, with the rise in popularity of personal financial content on Youtube and Tiktok, as well as the likes of Cathie Wood, both companies received massive support from the retail investors.
Picture: Retail Investor. Source: Unsplash
One of the reason they are chosen by content creators and popular fund managers are disruptive technology with high growth. Since they have gone through the difficult time waiting for the regular society to catch up with their vision, both companies are benefiting from strong products that are being proved difficult to replicate in a short-time. For instance, traditional gasoline car markers like Ford or GM are taking huge loss adapting to make electric vehicles that are no where near Tesla's vehicles at the moment.
While the AI boom has just started, the data and methodology of using data will soon proved to be the deal-breaker. As quoted in Palantir conference call, it took them 3 years to perfect the necessary guild rail and privacy requirement from the government clients. Furthermore, the hallucination difficulty are causing major problems that Microsoft and OpenAI are still found difficult to deal with.
Take Out from Q1 2023 Earning Call
Palantir's revenue for Q1 2023 was $525.19 million, up 17.7% year-over-year, driven by an increase in revenue outside of USA in Q1 2023. The company also achieved positive operating income of $4.12 million, compared to a loss of $39.44 million in Q1 2022. Palantir's adjusted earnings per share (EPS) was $0.01, beating the consensus estimate of $0.048.
Palantir's growth was fueled by its two flagship platforms, Gotham and Foundry, which enable users to integrate, analyze and act on large and complex data sets. Gotham is mainly used by government agencies for defense, intelligence and homeland security purposes, while Foundry is used by commercial customers across various industries, such as health care, energy, manufacturing and finance. Palantir also launched Apollo, a cloud-based platform that allows customers to deploy and update Palantir software with minimal effort and cost.
Palantir's outlook for the rest of 2023 is bullish, as the company expects to continue its momentum and capitalize on the growing demand for its solutions. In fact, they expected to make profit for every quarters in 2023. Palantir raised its revenue guidance for Q2 2023 to $528-532 million, representing a 43% year-over-year growth rate, and for FY 2023 to $2.19-2.24 billion, representing a 20% year-over-year growth rate. Palantir also expects to achieve an adjusted EPS growth of 51%.
Verdict
#Full disclosure: I hold a small amount of Palantir shares at the time of this writing. Please do your own analyst before making any decisions.
So, is Palantir a new Tesla? The answer is not so simple. While both companies share some similarities in terms of vision, innovation, and growth potential, they also have significant differences in terms of business model, profitability, valuation, and risk profile. Tesla is a more mature company with a larger market capitalization and a positive net income. Palantir is a younger company in terms of dealing with big money hedge fund investors.
However, with seemingly the hype and the required technologies are in placed, Palantir might found itself in a perfect position to ride the wave of AI, which has the potential to disrupt every sector similar to the dotcom of 2000s. While old tech giants are scrambling to put together a complete product using AI, Palantir has already mastered their horn.
With all those factors, I believe Palantir is not the new Tesla, but it is the new Saleforce-Microsoft type of business. This is due to the future trend of AI industry development towarding Platform-as-a-Service or Software-as-a-Service due to the high infrastructure costs, as well as the lack of crucial enriched data. Thus, the growth for Palantir is not in B2C likes Tesla, but in B2B and B2G, which makes their future profile significantly less attractive.
However, at the current price of $9 USD, it is still a fairly cheap price for such an innovative company with massive cash on hand. My price prediction for F23 is $15, benefiting from the comming boom in new AI products by Google and Microsoft, which kicks of on May 10, 2023. Therefore, investing in either company requires careful research, due diligence, and risk tolerance. As always, investors should diversify their portfolio and invest according to their goals and risk appetite.
Comments