Palantir vs Snowflake, which one is better?

Palantir stock (PLTR) jumped 10%+ today amid the Russia-Ukraine war, days after Cathie Wood’s Ark Investment dumped its Palantir position.

This article will compare Palantir’s finance with another data analytic hot stock Snowflake (SNOW), and explain why Palantir could be a “safe stock” with huge potential.

Why compare PLTR with SNOW?

Both Palantir and Snowflake are in the SaaS industry for providing data analytics tools for enterprises.

Palantir’s 10-K quote:

- Palantir “Creates a Central Operating System for Data” and “Transform massive amounts of information into an integrated data asset that reflects their operations.”

Snowflake’s 10-K quote:

- Snowflake “Enabling customers to consolidate data into a single source of truth to drive meaningful business insights, build data-driven applications, and share data”

Palantir and Snowflake have very similar visions if not the same.

Growth

* Palantir’s revenue is higher than that of Snowflake, but the growth of revenue is much higher for Snowflake.

* Snowflake’s next quarter’s revenue growth will slow down but still be much higher than that of Palantir

* Both Palantir and Snowflake have high revenue retention rates. Snowflake probably has the best revenue retention among large SaaS companies.

* Snowflake’s customer (enterprise) count is 23X larger than Palantir’s.

* Palantir’s average revenue per customer is 30X of that of Snowflake and Palantir has higher customer growth rate.

I would argue Palantir’s top line is “safer” and more sustainable because 1) it will be harder for Snowflake to sustain a long term growth rate of 80%+, and 2) it will be easier for Palantir to acquire more small sales than for Snowflake to acquire more large sales.

Profitability

* Palantir’s operating income is improving more than that of Snowflake.

* Palantir spends less money on sales and marketing.

Palantir’s profitability is improving at a faster rate than Snowflake while spending less money on marketing and sales.

Valuation

* Palantir’s P/S ratio is 15.

* Snowflake’s P/S ratio is almost 80.

The market seems to give Snowflake a “crazy” premium due to its “crazy” revenue growth and retention rates. To maintain its high price, Snowflake has to maintain those “crazy” growth numbers. In comparison, Palantir has a much smaller downside in terms of valuation.

Summary

* Both companies have a bright future in the huge data analytic space with a lot of tailwinds.

* However, Snowflake’s valuation is possible but very hard to sustain in long run. Snowflake’s profitability is also an issue in the current Fed rate-increasing environment.

* Don’t forget, Palantir’s biggest customers are government and military. And a war just started yesterday.

* If I have to only choose one right now, I am all in on Palantir.