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Palantir Technologies (NYSE: PLTR) had a great November 12 Q3 result, with PLTR stock doing reasonably well for next year if such reports continue to be released

On top of that, Palantir appears to be on track to generate positive free cash flow once it does, PLTR stock will be on a path to move higher

For example, Palantir sales increased 52% year over year and adjusted operating income was $ 731 million in the third quarter.In addition, the company now expects fourth quarter sales to be up to 31% higher than last year In addition, adjusted operating income is projected to be between $ 44 million and $ 50 million

In my last article on Palantir, I talked about the company’s contrary stance on the typical Silicon Valley mindset, they go against the grain, so to speak, for being one of the few dedicated defense and law enforcement software companies

Now the company is talking about “momentum” in its operations, even though it focuses on an area not typical of Silicon Valley, for example Palantir expects sales to increase 44% in 2020 as a whole and the next Year will increase by 30%


In addition, the company just reported that it has just won a $ 300 million contract, the largest ever. Note that the company expects its annual revenue to be $ 1 this year will amount to 07 billion. Even if it is a 5-year contract, this equates to 6% of the company’s current turnover and more if the contract period is shorter

So far this year, Palantir has generated $ 285Negative free cash flow of 8 million, which translates into an average cash outflow of around $ 95 million per quarter. However, in the third quarter, cash burn improved significantly

For example, the free cash flow (FCF) was only negative 52 million USD This was less than half of the negative FCF of 113 million USD in the first and second quarter

As operating margins improve with higher sales growth, this will lead to higher free cash flow growth. Already this year, Palantir reduced its negative FCF in the first nine months of the year compared to last year

The negative FCF this year is around 225 million $ (44%) down to just $ 2858 million as sales jumped $ 257 million to $ 7706 million. In other words, 875% of revenue went profitable as a positive FCF

So it may be possible to see a quarter or two in the next year when the FCF goes positive or close to it, for example, when sales are up 30% or over $ 307 million USD grows (i.e. He 30% of USD 1,07 billion) next year 857% of that is positive FCF or $ 268 million, which is almost the same as the negative negative FCF of $ 285 million this year

This will have a big impact on PLTR stock as it will result in a positive FCF return, i.e. FCF divided by market value The point is that the market will be expecting a higher and positive FCF

I suspect PLTR will have a reasonable return over the next few years as FCF turns positive with rapid sales growth

Analysts are starting to wonder at the $ 33 billion market cap for PLTR stock, for example, in the last month through November 20 alone, the stock has shot up over 98%

That can be too much too fast. So the stock has a price-performance ratio of 33 times sales this year and 23 times sales 7 times next year

Some analysts still don’t believe the company will start producing free cash flow in the next year, for example TipRanksLAccording to com, the average target price of six analysts over the past three months is $ 1350, down over 25 % compared to today’s price

This is similar to the target price average of a survey by Marketbeatcom. In other words, analysts don’t believe PLTR stock is worth such a high price

Therefore, it appears that the market has already discounted the stock’s potential upside due to a possible positive FCF generation, however, I suspect that once the market can see that the company is on its way to a positive FCF , possibly forecasting a higher share price

On the day of publication, Mark R Hake had positions (neither directly nor indirectly) in any of the securities mentioned in this article

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World news – CA – PLTR share will rise when free cash flow has a positive effect on higher sales

Source: https://investorplace.com/2020/11/pltr-stock-will-move-higher-as-free-cash-flow-turns-positive-as-sales-rise/