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over nearly the entire history of palantir being an investable company the only thing the only thing the shares of the company have done is pretty much gone down now over the last five months shares of palantir have been absolutely rocket emojis to the sky and the noobs the Tom Nash called followers the people with Robin Hood gold and are over leveraged are starting to line up their next yacht purchase and maybe their Yacht-Master Rolex as shares of volunteer have absolutely skyrocketed over the last year up over 83 percent and year to date as shares of Microsoft and Google and Amazon and apple are up 50 60 70 percent well I tell you what folks if the shares of palantir did not go up in lockstep and even more there's literally absolutely no reason to be investing in high beta high risk stock like this now the question everybody is asking is can palantir stock continue to Rock It Up To the Moon and go higher and higher and higher what would that do to the evaluation metrics over at palantir and what would it do to the share price we'll talk about that on today's show in the context of the company reporting their Q2 earnings after the Bell what is going on investors something guys are doing well out there time to talk about palantir ticker symbol p-l-t-r as we said on the jump Shares are absolutely skyrocketing people are jumping in my comments acting like it's the first time they've ever seen one of their stocks a speculative stock by the way actually go up guys act like you've been here before okay everybody that is invested for any length of time has had a stock do what palantir has done the key is will it hold these levels and move higher and continue to outperform or is it time to take profit in a name like that that is what you should be talking about that is what you should be thinking about and the other thing you should be thinking about is how you can repeat this if you're able to repeat this over and over yes maybe you will get a yacht maybe you will start driving a nice car but until you do it over and over and over again we will assume it's simply a dead cat bounce or beginner's luck Q2 revenues for palantir came in at 533 million dollars that was in line with expectations and was up over 13 or nearly 13 percent Revenue growth year over year now the company also gave us guidance for the upcoming third quarter as well Revenue expected to be but between 553 million up to 557 the previous estimate was right at like I see a couple estimates right at 555 so they're kind of straddling that it's a nice job by this company and then when I come over here and look at the financials this is a company that it has has kind of reached scale from kind of its operating expense side and and that's exciting to see with this company we also got full year guidance as well as this company's you know more or less kind of got recurring revenue and very good visibility into its product sales revenue for the full year expected to be at about 2.21 billion dollars the prior range was essentially kind of straddling the middle of that now we have to keep in mind full year Revenue 2.21 billion dollars on a 38 billion dollar valuation this is no longer a quote value stock when it was maybe under 10 dollars per share now when we start looking forward with this company Wall Street has it pegged it kind of like a a mid-teens grower that that's on the revenue side companies going to rapidly kind of accelerate its earnings but based on the number of shares outstanding it's really not going to be that impressive and so you're looking at paying close to 15 times 20 24 revenues this is price to sales it's not priced earnings 15 times sales and then when you look out to 2024 you're paying about 70 times earnings so you've got a ginormous price to earnings and look I don't I look I don't mind buying high PE stocks Tesla Amazon these types of stocks I don't mind buying them your growth rate does have to match up and I am not sure a forward mid-teens growth rate is going to be enough to hold the shares where they're at and certainly it's not enough to push the shares significantly higher than where they are we'll talk about that more here in a second but I do want to look at these financials which really paint a picture of a very nicely growing company here your Revenue year over year went from 473 up to 533 talked about how that was you know 13 growth year over year more impressively than that look at your total operating expenses they barely budged from 412 up to 416 your cost of Revenue as well being more or less a software company stayed flat as well so off of 426 million dollars of gross profit we might have saw 416 million dollars of operating expenses and we've got positive operating income over this company I'd get excited about that 10 million dollars of operating income you start analyzing the number out give them credit for you know an extra 10 15 percent as the revenue increases and you're looking at what 40 million dollars 50 million dollars of operating profit but again again 50 million dollars in operating profit on a company worth 38 billion okay and on top of of that growing at just a mid-teens growth rate that is all all of that is a recipe for a stock that is going to get backslapped by the market once and again we're in a market right now we're freaking like Amazon and Google and Microsoft and Apple and pretty much any stock that has a pulse is up 40 or 50 60 percent guys that's not gonna last forever that's not breaking any news here when we have the pullback stocks like palantir are going to get kicked to the curb so before you get into my comments and celebrate the fact that your Robinhood account has gone from 200 up to six hundred dollars because of your all-in rocket emojis into palantir keep in mind that that is going to be shaved in half the next correction that we see now I don't know when the next correction will be could be a year from now could be a month from now but stocks like these is going to get absolutely obliterated in that scenario now the good news is is company has really strong financials on the balance sheet side has a boatload of cash in fact the company makes the the bulk of their profits from just uh income on the interest on their debt you see here interest income just over the last three months was 30 million bucks for the last six months it's over 50 million dollars so the company's doing a nice job High interest rate environment company with very little liabilities and almost no debt gets rewarded as they should now when you come over here to the cash flows over at palantir wonderful really really solid stuff six months ended you pull down a pretty negative number last year it's turned positive this year from a net income perspective Company still is rewarding the shareholders or excuse me the employees with large amounts of stock based compensation which is totally fine and totally kosher at a company like this now what we also got was the company announced that they would be doing a one billion dollar share buy back and and look I'm not a CPA I'm not a tax expert by any means uh here's how I think the company is thinking about this for a six-month period they're paying their employees through the shares of palantir 228 million dollars they're going to take this one billion dollars and buy back the shares so it's going to offset the stock based compensation and this is probably a far more tax efficient way to do this you're avoiding payroll taxes I'm assuming you're avoiding some corporate taxes as well all in all I I don't mind it there are going to be some on the bear side that are going to say look a company like this should be a high growth company they should be investing this one billion dollars into r d they should be investing it maybe in Acquisitions they should maybe socket away for a rainy day and earn five percent like they have been on their balance sheet I disagree with that a little bit on companies that are really aggressively do stock based compensation and this is aggressive stock based compensation when your stock based compensation is exceeding your net income and you know is a Laura actually a pretty decent percentage of your Revenue it's like 20 percent of the company's Revenue over the past six months I I don't mind the stock based compensation as as a way to kind of more or less offset that now the company is generating large amounts of operating cash flow compared to last year 97 up to 277.
look there's reasons why this stock is rallied a lot of it has to do with the fact that the markets including this stock were largely oversold into 2020 or 2022 and look they've just had a a rally since then okay I mean if you're in stocks that haven't gone up year to date you uh you know you're you're not doing things right everybody looks like a genius right now in 2023 trust me but it's an asset like business I tell you what purchase a property plan equipment basically non-existent over the last six months and they're issuing some common stock options so I like what I'm seeing from a financial perspective companies scaling up nicely they're doing a nice job controlling costs it's exactly what you want to see with this company now here's the deal there are two class of shareholders as it relates to palantir they're the ones that bought when Tom Nash was pounding the table on this thing at 20 21 22 25 per share they're largely still under water and they're just hoping to get back even that is represented here by this volume profile as really what you need to pay attention to on a volume profile is when you have the bars really stick out far that means you have a large amount of accumulation in those zones and what you'll notice anytime you see this and it's not always the case but anytime you're looking at technicals people confuse it like giving you probabilities it's more giving you like the possibility of things and that's actually very valuable as it relates to the stock market if you if you look at a stock chart and you say uh I don't look at that that's like a real estate agent saying that they don't look at comps and they don't look at prices you're an idiot this is just a price chart it's nothing more than that but what you're going to notice is when you have these large accumulations it's hard for the stock to really break out above it and you see here as Tom Nash was pounding the table on this stock and like the the mid-20s the stock was accumulated during that time but it never really could kind of bust out above it and then once it busted below it is a lookout below moment now the same thing occurred down here you had nice consolidation range with palantir between we'll call it maybe seven up to about ten dollars per share the stock took like this is like over a year basically where the stock Consolidated sideways simply could not get above that level but then boom once it does you do have these nice pops so what this tells me is your upside with palantir is back into this consolidation range where the original buyers of these shares that were all hyped up they're going to get back to break even they could have been in any number of stocks I mean we're talking about hundreds of other stocks over the past couple of years where you would have actually made money there's going to be a lot of people in palantir while yes you've had a nice rally off of the lows they're just looking to break even on these shares and so you're gonna have trouble pushing higher or considerably higher as it relates to palantir at these prices on top of that you combine it with the fundamentals if this stock continues to move higher a 74 P turns into 80 90 100 and then eventually you'll have the stock market have a little bit of a correction and stocks like this will be kicked to the curb your 14 15 times forward sales will turn into 18 19 20 and these are the very first stocks I don't have to tell you this all most of you experience this these are the first stocks that get kicked to the curb in that type of scenario so your upside in volunteer is probably back to this consolidation range which you know look it's still 25 maybe 30 percent higher a stock like this gets kicked to the curb it's back down to to the consolidation area you're probably looking at about 50 percent declines in the shares at that point but look companies doing a fantastic job as it relates to controlling operating expenses there are going to be some people that pick on this company that they're not investing in r d in the business instead buying back the shares after a 180 percent rally year to date and the stock is overvalued from virtually every metric that you look at and it's not really coupled with a massively high growth rate there's going to be people that pick on the stock in that scenario and on top of that you do have a large cohort of shareholder that are going to pre create selling pressure up here in the mid 20s this stocks least path of resistance is actually lower I know that's going to make some of you guys cry and whine as your Robinhood account has finally turned positive after you invested in Neo when lucid and rivion and all of these hype stocks during 2020 and 2021 meanwhile many of the mega cap tech stocks are at or approaching all time highs hopefully you guys have a great day out there we'll be back again later this week good luck with your Investments
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