{"id":476821,"date":"2021-07-11T10:21:46","date_gmt":"2021-07-11T14:21:46","guid":{"rendered":"https:\/\/financhill.com\/blog\/?p=476821"},"modified":"2021-07-06T20:59:08","modified_gmt":"2021-07-07T00:59:08","slug":"palantir-vs-general-dynamics-which-defense-stock-is-better","status":"publish","type":"post","link":"https:\/\/financhill.com\/blog\/investing\/palantir-vs-general-dynamics-which-defense-stock-is-better","title":{"rendered":"Palantir Vs General Dynamics: Which Defense Stock Is Better?"},"content":{"rendered":"<p><strong>Palantir Technologies Inc (<a href=\"https:\/\/financhill.com\/search\/valuation\/PLTR\">NYSE:PLTR<\/a><\/strong><span style=\"font-weight: 400;\"><strong>)<\/strong> has Wall Street buzzing for its big-data approach to national defense, but <strong>General Dynamics Corporation (<\/strong><\/span><strong><a href=\"https:\/\/financhill.com\/search\/valuation\/GD\">NYSE:GD<\/a><\/strong><span style=\"font-weight: 400;\"><strong>)<\/strong> had a great 2021 too. The government contractor focuses on aerospace and national defense communications and gear too.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">So, which is the better defense investment between Palantir vs General Dynamics?<\/span><\/p>\n<p><iframe loading=\"lazy\" style=\"margin: 0 auto; border: 0;\" src=\"https:\/\/financhill.com\/widget\/charts\/PLTR?defaultOverlays=SMA20%2CSMA200&amp;periodGrouping=daily&amp;defaultSeries=candlesticks\" width=\"720\" height=\"400\" frameborder=\"0\" scrolling=\"no\" seamless=\"\"><\/iframe><\/p>\n<p><span style=\"font-weight: 400;\">GD is deeply invested in aerospace, and it\u2019s more than just military that\u2019s craving the company\u2019s jet technologies. Private jets are rising in popularity among the wealthy elite who wish to travel with more social distance than a commercial flight can provide.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Meanwhile, <strong>Palantir is a data powerhouse that\u2019s moving to leverage big data for advanced analysis and intelligence in more business sectors<\/strong>. The same underlying technologies helping in our nation\u2019s counter-terrorism and cyber defense can help financial, healthcare, retail, and other industries automate their processes and get more done.<\/span><\/p>\n<h2><b>The Bull Case for Palantir<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Palantir started in 2003 by a group of co-founders including <strong>PayPal (<a href=\"https:\/\/financhill.com\/search\/valuation\/PYPL\">PYPL<\/a>)<\/strong> billionaire Peter Thiel and company CEO Alex Karp. <\/span><\/p>\n<p><strong>It built out a data network and roster of data scientists to use artificial intelligence to scrape big data. This adaptive technology proved successful against high-tech cyber threats, making it a useful tool for intelligence agencies. <\/strong><span style=\"font-weight: 400;\">Government contracts make up over half of the company\u2019s revenues. <\/span><\/p>\n<p><iframe loading=\"lazy\" style=\"margin: 0 auto; border: 0;\" src=\"https:\/\/financhill.com\/widget\/fundamentals\/PLTR?defaultTimespan=quarter&amp;defaultType=revenue\" width=\"720\" height=\"400\" frameborder=\"0\" scrolling=\"no\" seamless=\"\"><\/iframe><\/p>\n<p><span style=\"font-weight: 400;\">Cathie Wood\u2019s ARK Invest holds a sizable position in the company because her team of analysts believe in Palantir&#8217;s opportunity to expand from the government to the commercial sector. Examples of commercial use include medical suppliers, who can optimize their supply chains to anticipate imbalances. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">In times of demand or supply stress, Palantir can prove invaluable. The distribution at scale of vaccines is a recent use-case. In fact, the pandemic helped to prove the company\u2019s value to businesses in every industry, which is why investors like Wood favor it.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The company is a play in more than just national defense \u2013 it\u2019s on the cutting-edge of artificial intelligence and big data applications. <strong>Market expansion alone is expected to support a growth of 2x in the company&#8217;s valuation over the next 5 years.<\/strong><\/span><\/p>\n<h2><b>Will Sales Growth Be A Problem For Palantir?<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Although the company has a lot of upside, investors may not capture it in the short-term. <strong>Palantir notoriously has an investor-unfriendly governance structure that keeps Thiel, Karp, and President Stephen Cohen in what seems to be eternal control of the company.<\/strong><\/span><\/p>\n<p><span style=\"font-weight: 400;\">It\u2019s also difficult to get much transparency into the inner workings of the firm, which should be a red flag for investors. And that could prove to be a bigger problem as time goes, because the company burns through cash.<\/span><\/p>\n<p><span style=\"font-weight: 400;\"><strong>Palantir spent $165 million in 2019 on operations, which is an over 300 percent increase from the prior year. That only led to a 25 percent revenue increase<\/strong>. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">It spent $450 million in marketing costs while general and administrative expenses were $321 million. <\/span><span style=\"font-weight: 400;\">That\u2019s a big cash burn for a company not yet dropping much to the bottom line. It may be the wave of the future, but Palantir\u2019s AI and data play isn\u2019t flying off shelves just yet. Indeed there is concern that sales success is overly dependent on the CEO.<\/span><\/p>\n<p><iframe loading=\"lazy\" style=\"margin: 0 auto; border: 0;\" src=\"https:\/\/financhill.com\/widget\/fundamentals\/PLTR?defaultTimespan=quarter&amp;defaultType=earnings\" width=\"720\" height=\"400\" frameborder=\"0\" scrolling=\"no\" seamless=\"\"><\/iframe><\/p>\n<h2><b>Is GD Stock a Good Buy?<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Hedge funds are typically bullish on General Dynamics stock because of its massive government contracts. In fact, it secured a <\/span><a href=\"https:\/\/www.datacenterdynamics.com\/en\/news\/general-dynamics-wins-3955m-data-center-support-contract-extension-from-dhs\/\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">$395 million DHS data center contract<\/span><\/a><span style=\"font-weight: 400;\"> in summer 2021 that continues the ongoing relationship with secured funds that long-term investors like.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The company can easily support its $50 billion+ valuation and should be able to continue growing as airlines pick up and the burgeoning space industry begins. That makes it a potential contender for a $100 billion market cap stock.<\/span><\/p>\n<p><iframe loading=\"lazy\" style=\"margin: 0 auto; border: 0;\" src=\"https:\/\/financhill.com\/widget\/fundamentals\/GD?defaultTimespan=quarter&amp;defaultType=revenue\" width=\"720\" height=\"400\" frameborder=\"0\" scrolling=\"no\" seamless=\"\"><\/iframe><\/p>\n<p><span style=\"font-weight: 400;\"><strong>GD is mostly known for its aerospace division, but it\u2019s involved in all manners of advanced technology and military contracts.<\/strong> And private jet sales are up in the wake of the pandemic, as the wealthy elite want to travel without the associated health risks of commercial flights.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Also, dividend investors appreciate the company\u2019s high yield. It paid an impressive $4.76 annual dividend in the year following the pandemic and has raised its dividend annually for over a decade consistently.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This makes the company an attractive long-term hold, but top funds have never been less bullish on GD stock than in 2021, according to SEC filings. Why might institutional enthusiasm may be waning?<\/span><\/p>\n<h2><b>GD Stock May Be Best For Conservative Investors<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">The problem with government contracts is that they can come and go with changing administrations. The company had several issues in divisions like its Gulfstream segment.<strong> While the short-term revenues are rising, this could be temporary because of the pandemic and not indicative of a 10-year trend.<\/strong><\/span><\/p>\n<p><span style=\"font-weight: 400;\">And the company\u2019s marine segment may end up carrying other departments as it leans into a $9.5 billion U.S. Navy contract for Columbia submarines. It also has several T-AO Oilers coming down the pipeline.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">On the whole, the company is relatively stable and has predictable revenues and earnings. For conservative investors that&#8217;s a plus. For risk-seekers, the upside surprise opportunity is limited.<\/span><\/p>\n<h2><b>Palantir Vs General Dynamics Stock: Which Is Best?<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Palantir and General Dynamics are two defense contractors with growing revenues in the private sector. Although Palantir gets a lot of media buzz, the company is burning through cash. It has a long way to go toward fully monetizing its AI solution, however it has the potential to grow exponentially once it unlocks this potential.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In the meantime, rival General Dynamics is expanding its presence in the aerospace and marine industries to complement its existing government contracts. It\u2019s also continuing to snag data center contracts that keep it afloat while the space industry grows.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Either company could be a great national defense play, but don\u2019t expect more than a 2x growth over the next ten years from GD while PLTR could double in 5 years if revenues can be scaled more predictably and turned into bottom line growth.<\/span><\/p>\n<p><iframe style=\"width: 100%; height: 418px; margin: 0 auto; border: 0;\" src=\"https:\/\/financhill.com\/valuation\/GD\" frameborder=\"0\" scrolling=\"no\" seamless=\"\"><\/iframe><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Palantir Technologies Inc (NYSE:PLTR) has Wall Street buzzing for its big-data approach to national defense, but General Dynamics Corporation (NYSE:GD) had a great 2021 too. The government contractor focuses on aerospace and national defense communications and gear too. So, which is the better defense investment between Palantir vs General Dynamics? GD is deeply invested in [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":476825,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"content-type":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[22],"tags":[],"class_list":["post-476821","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/financhill.com\/blog\/wp-content\/uploads\/2021\/07\/Untitled-design-9.jpg","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p9czeV-202F","_links":{"self":[{"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/posts\/476821","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/comments?post=476821"}],"version-history":[{"count":14,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/posts\/476821\/revisions"}],"predecessor-version":[{"id":476855,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/posts\/476821\/revisions\/476855"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/media\/476825"}],"wp:attachment":[{"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/media?parent=476821"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/categories?post=476821"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/tags?post=476821"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}