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palantir is up a hundred and twenty six percent year-to-date but in last month it's down about 12 percent so the question a lot of people are asking is is it the right time to buy are you buying it on a temporary dip or not in this video guys we're gonna go over Bull and Bear cases for palantir some high level metrics about the company analyst estimates of course our eight pillar process but we're going to finish it off with what you're probably wondering the most about is what price should you pay for palantir stock now in this video we're going to have things for beginners and things for more advanced investors and everything in between so no matter where you are on that Spectrum there's something in this video for you so please stay with us the entire time I guarantee you'll learn more you'll understand more and there will be things that are confusing that's okay they were confusing for me and they were confusing for over the 200 000 people who subscribe to our Channel but the more you listen to it the more you'll understand and the more you understand and learn the less you will fear and that is our goal here to teach that process so that money doesn't become fearful anymore to make you more powerful in your investing Journey all right so let's go over this palantir is a 31 basically a 30 billion dollar market cap business which means if you buy all the shares outstanding the market and you want to own 100 of the mark the shares out there you're going to pay about 30.7 billion but Mo check this out their Enterprise Value is 28.5 billion guys it's rare to see Enterprise Value less than market cap so what's Enterprise Value it's taking all that market cap and adding on the debt but taking off all the cash so this shows they have a lot of cash on hand it's hard for companies to go under when they have practically no debt or net cash that's awesome for palantir a big plus for palantir right yeah um some other things though net income isn't there yet however their free cash flow you showed 48 million dollars in loss in last year Mo but free cash flow of 375 million that's incredible oh not good it's great mother average five year net income is negative 460 but their free cash flow is only negative 6.8 million they're showing more cash flow than net income I love that usually it's the other way around because it's easier to manipulate net income than it is to manipulate free cash flow so this is a definite positive and definite plus for palantir great stuff here okay but again guys no profit yet showing but they have a huge gross margin Mo Microsoft 68 palantir is 79 this means every single dollar they bring in extra dollar they bring in in Revenue 79 of it goes to the bottom line to pay their taxes and move on that's incredible that's a big number guys that means if they're able to double their income tomorrow almost 80 percent of that money is gonna go to the bottom line that is awesome okay no dividend really bad return on invested Capital because they're growing so much so I'm not worried about this not worried about this at all so it's going to excuse some of the numbers remember palantir is still a fast growing business and when they're growing they're reinvesting a lot of money so it can make the numbers look worse than it actually is Mo what are some um Bull and Bear cases for palant and even some news for palantir yeah some news so they so they're new their new kid on the Block kind of they're entering into a partnership with Azul energy to help them manage their 200 000 barrels of daily oil production Target is to get to 250 000 a day so and that's what and that's what palantir's goal is that's what their business model is they take data from companies and countries and use it to solve their problems they renewed a partnership with westrac for five years westrac is one of the largest caterpillar dealers in the world oh really yeah by the way it costs a lot of money become like a John Deere and caterpillar caterpillar I remember you were telling me about those numbers big numbers wow so they launched and it is a bull case they launched an artificial intelligence platform which allows language models to operate within the Enterprise space with privately held data they have 100 new customers oh wow and that's over three months and they're likely to add 300 more now my guess is one of the things I remember reading in their annual report or quarterly report was they're trying to get smaller customers to expand their revenue growth so before they were focused on smaller the last number of customers but higher Revenue numbers and that's great but again if there's such a high margin business it's okay to get smaller customers and just really drive that revenue and profit so this one is not really bold case bear case and something we talk about all the time three consecutive quarters of get profitability with earnings per share of one cent so we're a little concerned about this guy if you go back to our past videos on palantir they conveniently beat by one percent and the way they beat if you look at the notes was very fishy yeah that kind of bothered us a little bit about palantir right right also their CEO's hairdo kind of bothers me a lot too what did she say more or less than the one cent all right let's do it are we online bullying right now bear case is probably some bear cases let's go so the full amount of their government contracts is 1.7 billion and there's no guarantee that the government will exercise those contracts yeah there's a lot of figure out yeah there's a lot of outs that the government has in those things yep so they they only exercise contracts one year in advance promising more than a year is not guaranteed so you know what's funny I was watching um Shark Tank last night with Lisa and one of the things we were looking at was like the Costco deals that people do Costco can return the last 15 of inventory you send them there's all these caveats in their deals and then people are like I want to be in Costco because I want to drive sales but but then the margin is lower then they have all these caveats it's kind of a tough one there it kind of seems like that's the way it is with the government uh last bear case here the most recent 10K which was December of 2022 total deal value for commercial customers was down 23 year over year yeah but again as I said before they're trying they've talked about how they want to get smaller customers and smaller contracts to grow their revenue yeah is that an excuse for why it's so hard to get big maybe so you guys throw your bowl and bear cases in the comments and because we're missing something or do you think these are even like if you look at the one the three quarters in a row of the profitability I just go that's not a bull case yeah but it's a bull case on the websites we looked at so so yes like most said comment below on what other Bull and Bear case you have in there when we next time we do a palantir video we will go back look at the best comments and give you a shout out so it'll get you a little internet Fame by us commenting on what you are and by the way if you're a member of our community put what your Community member name is so we can bring that out too all right so let's look at the eight pillars for palantir now guys remember of them of your own choosing and there's like four quadrillion different variations but Mo this is a three check mark business and the three checks are the things you'd expect in a fast growing startup and the X's are exactly what you expect in a fast growing startup absolutely so I am not even paying attention to this I don't even care it's not helpful I don't think it's helpful at all all I care about right now is what is their potential in the future I will say this the only thing that bothers me I should take that back this really bothers me shares outstanding they're diluting the heck out of the owners in the company they are bringing more and more Partners onto you so if the company grows 100 they keep issuing more shares you're not going to get that same growth they're going to get a much lower number common for a small company very common but they have cash flow now they have a good they have a good balance sheet they shouldn't be diluting anymore and let's go see how they've diluted quarter to quarter quarter to quarter so we go to our we go to our income statement at the very bottom it shows shares outstanding so they're still diluting but it's definitely decreased but 20 million shares here and there it's why guys why are you doing that let's see what analysts are saying on the analyst estimates so analysts are expecting this actually surprising me Mo analysts are expecting 22 cents per share in profit this year and 48 cents in five years I expected a heck of a lot more four years yeah I expected way more even Tim said wow wow guys I would expect it to be like two dollars here in December 2027.
that kind of bothers me yeah maybe it's part of the whole smaller contracts thing right it's true what I mean there's a lot of unknown too well here's what bothers me look at the revenue growing contracts or the revenue growth you said again I was expected with this kind of Revenue growth I'd expect the profit to be way more than with 79 gross margin that means 80 of their revenue grow that they grow 80 percent of it go to the bottom line when they do this much revenue growth it should be four or five x their profit easily yeah that's kind of a red flag for me that kind of bothers me okay I'm also I'm surprised how few analysts there are for a company of this stature yeah that's true a lot of publicity now guys in our past videos we talked about how we were interested in Tesla sorry palantir when it was at 40 45 a share we said be careful I'm interested at five people are like you're crazy well what was the 52-week low on uh palantir is it in the fives it was 5.84 cents I didn't buy any because it didn't hit my price and I'm still worried about the way in which they report profit and yeah by the way I even though it got to the price point of yeah I would be a comfortable purchasing I just didn't I still was not couldn't get there I know it was tough yeah so guys it leads last question what price should you pay for palantir stock and that's why we have our stock analyzer tool which has been used over two million times by our users in the last couple years guys if you liked our tool here if you like all of our software if you like the two tools on the screen right here that you're talking to sign up for the software everythingmoney.com you get all of this you get all of our tools you get all the software we're adding we're adding so much data you get the community of members you get all this for about a dollar per day this is a great way in which you can decrease your stress about money super important check it out everythingmoney.com we have a 20 off going right now it'll allow you to get in at a low price and stay with us so guys everythingmoney.com check it out so MO give me your Revenue growth assumptions for the next 10 years on palantir how about 12 18 and 24.
I think that's higher than analysts on the high side it probably is but that's okay 24 a year for 10 years takes about nine times more in Revenue so it's about a 20 billion dollar Revenue business at that point that's going to be hard compared to where they're gonna be the five years but we'll see we wanted the high number to be a really really high assumption because we want to sit there and say hey is the current price of 14 15 bucks a reasonable price today okay what about the profit margin mode because we don't have profit margin yet I know this is a hard one um keep in mind though they've generated 18.4 percent of free cash flow margin in the last uh year yeah I was thinking 10 20 and 30.
let's do it and guys the tough part about this is we're going to get our numbers and it's going to assume profitability right now yes so that's the hard part I'm going to focus my value on palantir based on free cash flow right because they don't have the profit margin yet probably because of all their deductions having to do with money things like that and also how they have to recognize Revenue as it comes in so as an example a lot of times a publicly traded company especially in software let's say they sell a 10 million dollar contract maybe five million dollars comes in that's cash flow but they can't report that as income yet until they've released some of the software to the people so it might be 5 million in cash flow but nothing in income and that's the problem so just keep that in mind going forward free cash flow margin Mo what do you think about 15 25 35 I love it I think 35 is high but I'm okay with that now PE this is a hard one for this company because when it comes to PE we believe in starting at the market average of 15 but go higher if there's a higher return on invested capital A lot of growth and emote in this situation there's a lot of growth potential for this company so I think it deserves a premium because if two companies are exactly the same same Revenue same profit but one can grow 20 a year and one can grow five which one will you pay more money for of course the one growing at 20 per year so Mo what PE you're going to put on this company 15 20 25.
love it I same with free cash flow price of free cash flow great now here's the big one desired annual return guys remember you can get nine or ten percent by investing in a low-cost ETF so in order to buy an individual company you should want to make more depending on the company a company like this with a lot of volatility and still pretty young in its revenue and profit cycle there's a lot more risk involved and as we make higher and higher assumptions you need more and more margin of safety because the high assumptions are less likely to occur so mo low middle and high desired annual return for this company I actually put 15 20 and 25.
now a lot of people are going to disagree with them I don't because I still think it's such a young company with a lot of other risks that even if it hits at low end I want to make a good return here yeah this is a riskier investment than any other one absolutely so I know there's gonna be a lot of comments Below on our assumptions about this company and that's great and that's the art of investing you're going to have different opinions now guys I'm going to hit the analyze button I want you to do me a favor stay with us for a minute or two longer that's all I'm asking listen to our comments about these assumptions okay analyze scroll down so here's the scary part 175 at 260 Even in our best assumptions we're only at 850 or 10 and guess what we're still in the five dollar range for our middle assumption so things have not gotten that much better but here's the key guys if you pay nna lose about 5.7 percent if the middle assumptions occur you're gonna make about 7.7 and the highest assumptions occur you're going to make about 20 returns so even though they're red it's because of the returns that we were acquiring so guys I look at this it's just a little too tough for me at this price they could absolutely crush it and go even further up awesome for them but I do believe you got to be a little careful when it comes to company like this funny thing was even at 5.84 cents it was still a little too tough for me I think it was for me too I think it's just too hard Pyle yeah so guys everythingmoney.com sign up for our software it's a no-brainer it's about a dollar a day you get everything here take care
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