Palantir: Amazon AWS Partnership Is A Game Changer (PLTR) (2024)

Palantir (NYSE:PLTR) is my #1 bullish pick on the growth side of my portfolio. I started my position in PLTR on 10/26/20 and have purchased shares 12 times between $9.70 and $28.20. I stopped trying to time the markets a long time ago as it can drive someone insane. I buy stocks and add to positions when I see value in the share price. I am not a trader and I don't move in and out of positions frequently. Since the recent GameStop (GME) frenzy PLTR went on a run to $45 and over the past month has sold off by -29.66%. If you go back and listen to Alex Karp's conference call for Q4 & 2020 there is a lot to be excited about. My average price per share was around $10 and I have continued to cost average up because I believe PLTR has tremendous long-term potential.

On several occasions CNBC's Jim Cramer, Carl Quintanilla and David Faber have discussed ARK Invest's purchases from the prior day and continue to put the spotlight on Cathie Wood and Ark Invest. How others invest doesn't affect my opinion as I do a tremendous amount of research before I deploy capital but to see Cathie Wood and ARK Invest aggressively purchase shares of PLTR makes me smile. It looks like Ark hit the nail on the head because PLTR just announced its new Enterprise Resource Planning (ERP) system with Amazon (AMZN) AWS. Between the AMZN announcement and IBM's partnership I think the growth potential is absolutely immense for PLTR. I am extremely bullish and will continue to add to my position in PLTR as I believe PLTR will hit triple digits over the next several years.

(Source: Seeking Alpha)

Palantir and Amazon are teaming up and launching an Enterprise Resource Planning system on AWS

Many companies have been transforming their back office services by implementing an ERP solution. Previously companies would have a multitude of dedicated software platforms to accomplish tasks from accounting, procurement, risk management, supply chain operations, Human Resources, and many others. ERP platforms became popular as companies can deploy one software platform to accomplish many of these back office tasks, tie together business processes and enable the flow of data between them.

Amazon Web Services (AWS) is a cloud computing platform which offers over 200 fully integrated services from data centers with a global footprint. The AWS community consists of millions of active customers and tens of thousands of partners globally. AWS's customer base has a vast range across every sector with companies of every size from startups to enterprise level clients to public sector organizations. AWS has a partner network that includes thousands of system integrators and tens of thousands of independent software vendors who sync their products to work on AWS. AWS has built out a global cloud infrastructure with 80 availability zones within 25 geographic regions.

AWS is utilized by some of the most recognized companies. On the enterprise side companies such as Royal Dutch Shell (RDS.A), Capital One, Coinbase, Snap (SNAP), Salesforce (CRM), Netflix (NFLX), and The Coca-Cola Company (KO) all use AWS. Some well-known startups that utilize AWS are Airbnb (ABNB), Lyft (LYFT) and Nextdoor. In the public sector organizations such as FINRA and the FDA also utilize AWS.

(Source: Amazon)

Teresa Carlson who is the Vice President of Worldwide Public Sector and Industries for AWS stated

The AWS optimization for PLTR's ERP and the IBM Partnership are game changers for Palantir

I originally thought that the IBM partnership that Shyam Sankar (PLTR's COO) discussed on the conference call was groundbreaking but the AWS partnership may be even bigger. At the end of Q4 AWS had 32% of the cloud market share and was more than 50% larger than Microsoft's (MSFT) Azure cloud infrastructure. In January of 2021 Betanews published an article and indicated that Next Pathway which is an automated cloud migration company conducted a study and found that most companies are in the early stages of moving to the cloud. The study found that 65% of companies stated that cloud migration is a top priority and 94% said application migrations could take years to implement.

Many companies are either in the early stages or haven't begun their cloud migration. I am expecting the cloud computing market to expand rapidly as the pandemic has forced many companies to rethink and implement new ways of conducting business. The ERP optimization of PLTR's ERP system for AWS isn't just important for the current AWS customers, it creates a selling point for future AWS customers. Currently AWS, Azure and Google (GOOGL) (GOOG) Cloud are the three largest cloud providers. As organizations conduct their research and vet cloud providers AWS can now showcase the synergies & benefits of implementing PLTR's ERP on top of AWS. Some of AWS's largest clients including BP Plc (BP) and LANXESS have seen tremendous results from PLTR's ERP. I wouldn't be surprised if a communication went out to AWS customers or if the AWS reps are communicating with their clients about the ERP Suite. PLTR will now gain expose to the millions of AWS customers in addition to all of the future AWS customers that are onboarded.

(Source: Statista)

Similar to AWS, PLTR previously announced that they are intergrading their Foundry platform with International Business Machines (IBM) Cloud Pak and is gaining access to IBM's 2,500 person salesforce. IBM will be an official reseller of PLTR software in addition to having an integrated platform on their cloud product. IBM has allocated tremendous resources to their artificial intelligence projects and the collaboration with PLTR will allow IBM to make its AI software more user friendly. PLTR could benefit in multiple ways from IBM. First they now have 2,500 sales reps which aren't on their payroll with countless business ties selling their products. Second, IBM can now leverage PLTR's software to try and increase their position in the cloud market which will generate revenue for PLTR. AI is still in its infancy and if PLTR's user friendly systems is the missing link for IBM they could become one of the largest players in AI over the next decade.

(Source: Palantir Slide Deck)

The partnerships with IBM and AWS are groundbreaking for PLTR. They add instant validation that two of the largest companies in the world including the largest cloud company in the world want PLTR's ERP to be a front-end option for their cloud platform. The fact that IBM and AMZN decided not to follow MSFT and build their own ERP and instead choose PLTR speaks volumes for the ERP system PLTR has developed. We're going to need some time to see how this develops but I don't think we can speculate on the potential impacts yet. PLTR is gaining a huge sales team and potential customer base from IBM and AMZN. I can't wait for the next several earnings calls to see how these relationships mature.

Palantir's growth and future projections were appealing prior to the Amazon and IBM announcement now the sky is the limit

For a company that started off as a super-secret military software company PLTR has been diversifying and expanding into the private sector quite well. In 2020 44% of PLTR's revenue came from commercial business as it generated $482 million and grew by 107%. On the government side PLTR posted $610 million in revenue which was a 77% YoY increase and accounted for 56% of PLTR's overall growth. PLTR's revenue increased by 47% YoY to $1.09 billion in 2020. PLTR's revenue generated from new customers increased by 250% from $19 - $42 million in 2020 as well. PLTR also grew its larger customer base as the customers who fell into the $1 million revenue category increased by 32% while customers who brought in $5 million or more increased by 54%. On the high end PLTR's customers who accounted for $10 million in revenue or more grew by 50%.

(Source: Palantir Slide Deck)

ARK Invest and Cathie Wood have bene piling into PLTR hand over fist

On 2/18/21 Cathie Wood went on CNBC and discussed Ark's aggressive investments in PLTR. She stated that "some of the most important innovations in our lifetimes have started in the government especially in the defense sector and intelligence sector." She also said "With this short term time horizon we have not spent enough in innovation and so PLTR's attitude is refreshing, its exactly how we invest we want our companies to invest aggressively, we don't want profits now, we want them to invest aggressively because were moving into many winner take most markets." In the Ark Next Generation Internet ETF (ARKW) PLTR has become the 18th largest holding out of 54 companies. PLTR makes up 1.82% of ARKW as it now holds 5,266,845 shares. ARKW added 497,100 shares on 1/14/21, 1,560,000 shares on 2/16/21, 867,600 shares on 2/26/21 and another 670,300 on 3/3/21. In the ARK Innovation ETF (ARKK). PLTR is now the 34th largest holding of 55 companies as 10,251,588 shares are held in the fund. ARKK added shares aggressively over the past 2 weeks purchasing 5,274,000 shares on 2/18/21, 2,497,000 shares on 2/26/21, 1,988,000 shares on 3/3/21 and another 460,300 shares on 3/5/21.

Ark Invest has managed 5 of the hottest funds in 2020 and generated large returns for their investors. Just because others are investing doesn't mean that you should. Everyone should do their own research and decide if a stock like PLTR fits within their investment strategy. In 2020 it seemed like Cathie Wood had a crystal ball as some of her most bold predictions came true. Her investment thesis and style aren't for everyone as they are created around disruption and innovation. When I sit back and look at how much the world has changed from 2000 to 2010 then 2010 to 2020 tech has revolutionized our lives. I firmly believe that history has taught use evolution and innovation never stops occurring and because of this I think we're going to see tech dominate the markets in 2020 - 2030. I think Ark Invests aggressive purchases of PLTR are very positive as the managers with some of the best track records in recent times have become incredibly bullish.

(Source: ARK Invest)

Conclusion

Shares of PLTR have continuously sold off over the past several weeks and I took the opportunity to add shares to my position. PLTR's announcement of partnering with AMZN and optimizing their ERP Suite for AWS in my opinion could be bigger news than the IBM partnership. AWS is the largest cloud provider in the world and the majority of companies are in the early stages of their digital transformation. I believe the partnerships with IBM and AWS grant PLTR a level of credibility and expertise that is hard to match. The hottest ETF company Ark Invest has been buying shares hand over fist over the course of the sell off and Cathie Wood went on CNBC and discussed why they like PLTR. This is a long-term hold for me and I plan on adding shares in the future. I believe PLTR could be a triple digit stock in the future and their growth potential could be underestimated.

This article was written by

Steven Fiorillo

28.08K

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I am focused on growth and dividend income. My personal strategy revolves around setting myself up for an easy retirement by creating a portfolio which focuses on compounding dividend income and growth. Dividends are an intricate part of my strategy as I have structured my portfolio to have monthly dividend income which grows through dividend reinvestment and yearly increases. Feel free to reach out to me on Seeking Alpha or https://dividendincomestreams.substack.com/

Analyst’s Disclosure: I am/we are long PLTR, AMZN, GOOGL, SNAP, BP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: I am not an investment advisor or professional. This article is my own personal opinion and is not meant to be a recommendation of the purchase or sale of stock. Investors should conduct their own research before investing to see if the companies discussed in this article fits into their portfolio parameters

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