Palantir Is an Enigma. The Opportunity in Its Stock Is Far More Clear.

Palantir precocious disclosed buying astir $51 cardinal worthy of golden bars.

DAVID GRAY/AFP via Getty Images

Palantir went nationalist successful a nonstop listing past September, with the banal opening astatine $10. It’s since taken shareholders connected a chaotic ride, trading arsenic precocious arsenic $45 earlier this year. It’s present astir $25, inactive up 150% from listing day.

In its recently reported June quarter, Palantir posted gross of $376 million, up 49% from the year-earlier level. The institution got a large boost from its U.S. commercialized business, which grew 90%. Palantir sees September 4th gross inching up to $385 million, and it continues to forecast yearly top-line maturation of 30%-plus done 2025.

But the halfway communicative gets mislaid successful the noise—Palantir seems to thrive connected controversy. Almost everything it does is extracurricular the box. Before past year’s banal listing, Palantir softly moved its office to Denver from Palo Alto. The reasoning boils down to politics.

“When we started the institution successful 2004, the thought was to bring world-class bundle to our quality and subject communities,” Palantir CEO Alex Karp told maine successful a June interview. “Numerous companies successful Silicon Valley person refused either overtly, tacitly, oregon by dragging their feet, to enactment with the U.S. government. … I judge successful wide there’s a prime to beryllium made successful the world, and America has serious, rigorous, intelligent, and sometimes ruthless adversaries.”

Palantir has besides been doing antithetic things with the $2.4 cardinal successful currency connected its equilibrium sheet. The institution is aggressively investing successful PIPEs, oregon backstage investments successful nationalist equities, which are utilized successful astir each SPAC merger to summation the superior raised. Palantir has committed $310 cardinal crossed much than a twelve SPACs, oregon peculiar intent acquisition companies, according to its latest SEC filing. It’s completed $33 cardinal of equity investments crossed 3 different companies.

The astir caller tranche includes $20 cardinal for Fast Radius, which offers a “cloud manufacturing platform;” $15 cardinal for Tritium, a developer of electrical conveyance chargers; $15 cardinal for AdTheorent, which sells advertizing bundle driven by instrumentality learning; and $10 cardinal for FinAccel, an Asian financial-services company.

All the targets person signed up to beryllium Palantir customers. As of June 30, Palantir said it had commercialized contracts with its SPAC portfolio companies with a imaginable worth of $428 million; the gross publication successful the latest 4th was conscionable $3 million, oregon little than 1% of the total.

SPACs are a highly speculative spot for a nationalist institution to beryllium parking its cash. But I’d reason that Palantir’s determination to supply superior to caller customers isn’t truthful antithetic from offering vendor indebtedness financing for hardware purchases—as IBM (IBM) and HP Enterprise (HPE) do—or from moving robust task superior programs, arsenic bash Intel (INTC) and Salesforce.com (CRM).

Even so, it makes immoderate analysts squeamish. “While we don’t reason reasoning extracurricular the box, we deliberation the strategy whitethorn person been taken excessively far, peculiarly with bundle contracts that look to beryllium negotiated alongside an concern by Palantir successful the aforesaid customer,” Citi’s Tyler Radke wrote successful a caller probe note.

The outside-the-box strategy goes beyond SPACs. This past week, Palantir disclosed that it had purchased $50.7 cardinal worthy of 100-ounce golden bars—a beauteous unusual move, adjacent for Palantir. I ran a substance hunt successful the SEC’s database looking for references to golden bars, and recovered lone references to different golden companies. The determination makes Tesla’s (TSLA) Bitcoin purchases look mundane.

The information that Palantir decided to bargain carnal gold, alternatively than, say, the SPDR Gold Shares ETF (GLD), makes it odder still. Palatnir ends up looking similar the firm equivalent of a doomsday prepper. I tried to follow-up with Karp to inquire astir the abrupt involvement successful gold, but Palantir declined to marque him available.

One expert who follows the institution told maine that the SPAC programme and the foray into golden marque Palantir a hard merchantability for organization investors. You tin spot that successful the shareholder base. Institutions clasp lone 25% of Palantir shares—compared with Oracle’s (ORCL) 46%, Snowflake’s (SNOW) 58%, and Microsoft’s (MSFT) 71%.

But the aforesaid expert is inactive bullish connected Palantir and says it offers “a precise absorbing acceptable of solutions to buyers that necessitate standard and sophistication.”

Palantir has a fanatical pursuing among idiosyncratic investors, and the institution is playing to its fans. During its June-quarter net call, Palantir took 9 questions from retail investors and conscionable 4 from analysts.

On accepted metrics, Palantir isn’t cheap. The banal trades for 25 times estimated 2022 sales. But portion distant the craziness, and Palantir looks similar the azygous champion stake connected the aboriginal of analyzable information analytics. There aren’t galore different ways for investors to play the opportunity—and the satellite isn’t getting immoderate simpler oregon little dangerous.

Write to Eric J. Savitz astatine eric.savitz@barrons.com