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we've got palantir Q3 earnings we've got a 16 billion dollar valuation we've got a technical chart pattern sitting right on the edge or a cliff of support we'll talk about that on more on today's show what is going on investors hopefully you guys are doing well out there time to talk about palantir technology remember doing videos on this stock when this thing was like a 50 60 70 billion dollar company and I was like this doesn't make any sense and my comments would fill up like no you're not seeing the big picture this type of thing and I've done a couple of videos more recently on this stock where it's like okay it's still overvalued and when we walk through these Q3 numbers obviously first of all the company's not profitable even when you factor in stock based compensation it's still not a profitable enough company to Warrant a 16 billion valuation but you got a strong balance sheet over here and you do have some cash flows and you obviously have a still a relatively strong growth rate going forward although wall Street's anticipating that it kind of reacts accelerates into next year and certainly that's the great question Mark with palantir and a lot of stocks that we're looking at but more recently okay things have started to look a little bit better obviously when you go from like a 70 billion dollar valuation down to 16 and you continue to grow well things do look okay now year to date stocks down 60 but we just got those Q3 earnings at palantir Revenue coming in at 477.8 million dollars that was still 22 growth year over year it beat Expectations by about three million dollars we won't look at this non-gaap EPS number right here on the headline we'll come over here and we'll look at it from a financial perspective but obviously the upcoming quarter and the upcoming year even for palantir is what investors are buying into the upcoming quarter the fourth quarter so we just reported Q3 the upcoming fourth quarter we got guidance from the company today coming in at about 503 million to about 505 million dollars Wall Street was actually expecting a number closer to 506 the high-end estimate at Wall Street was for 508 the low end was at 501 so palantir arriving kind of in the middle there but for a stock with a still a premium valuation because you notice here for the full year of 2022 they're expecting a shade over 1.9 billion dollars we'll give them credit for like two billion dollars to make the math really easy we still got like an eight-time sales on this one so if you're at eight times sales you kind of want the company to at least meet guidance if not kind of accelerate over and above it and on top of that you're at eight times sales and you're not profitable from a gap perspective and you're essentially kind of break even from a non-gaap perspective on those earnings I think wall Street's expecting more now speaking of Wall Street expecting more look at the Ford Revenue estimates just gonna be 17 in that fourth quarter but then somehow going to back and re-accelerate into a mid-teens grower by the back half of next year and then sustain that into 2024.
that is some Tom Nash like bullish projections on this company and if it cannot meet those expectations well it'll probably fall off this Cliff of support now City chimed in today saying that palantir will probably have further downside due to slower growth so I don't think City buys into this growth rate and slower government spending we obviously got those elections I believe they're tomorrow here in the United States more than likely look I'm not in the business of protecting elections and the people have done it over the last couple of election Cycles have done a poor job of it but if we do end up with a split government where does that leave government spending for military spending for government contracts and those types of things my guess is some of those things will just continue to carry on as all politicians from both sides like to spend money but city is chiming in and saying that there's potential government inflection in into next year as those federal spending issues start to crop up and obviously you have higher interest rates so the every dollar that the government kind of spends in deficit spending is obviously costing more and more it hasn't slowed them down in the past but maybe this election cycle will finally see some fiscal responsibility I wouldn't hold my breath now back to palantir revenue at that 477.9 million dollars last year you're at 392.
what Wall Street loves about this company it checks two boxes okay it has relatively high growth rate okay the growth rate at kind of the mid 20s certainly not what it was when this stock was 50 60 70 billion dollars but look not air not all companies can just growth at that rate no company can grow at that rate forever still solid growth rate even better than that are these cost of revenues are very very small so off of 477 million dollars worth of Revenue you have just 107 million dollars in cost and so you're ending up with the gross profit of 370 but here's where Wall Street is kind of caught up with this company and here's where the bull case arguments of this company a year ago two years ago when the stock was 60 70 100 200 percent higher they just didn't understand that these operating expenses were not scaling with the business your sales and marketing up year over year r d basically flat though year over year and what the company let's give the company credit their General administrative expense which actually exceeds their research and development expense that actually ticked down so basically flat year over year so we're starting to see a little bit of normalization in the company's expense line and so you see over the last year you went from 397 on total operating expenses up to about 432 million dollars so that shrunk your loss from operations year over year down from we'll call that 92 million down to about 62 million dollars but you're still seeing okay yeah this company is projected to grow in subsequent quarters but we're not likely to see like actual operating profits at this company really anytime soon on top of that a lot of these operating expenses are stock based compensation as you see down here 140 million in the most recent quarter 184 last year that is leading to more and more shares outstanding when you have more and more shares outstanding on a stock that is in a well-defined downtrend well obviously that contributes to more selling and more supply of shares that are already tanky now probably the beauty of palantir is their balance sheet they've got a strong cash position looks like to me since the beginning of the year as well you've got accounts receivable ticking up as well that's showing you that you have maybe uh you know you've earned some revenue or you're going to achieve and earn this Revenue got a nice book of business that they're working on those government contracts obviously the sale Cycles a little long and the payback on those is also a little long from a liability perspective almost nothing here okay just 932 million dollars worth of liabilities more than cons that out on the cash side you've got 3.3 billion dollars worth of total assets and just 932 million dollars worth of liabilities so you can factor that in if you really want to do a deep dive on this valuation well you can factor in 16 billion dollar valuation but almost no liabilities and so it gives the company a tremendous Runway into the future and certainly could operate basically how it is basically with no profits from an operating perspective they can do that for a considerable amount of time now in these no profit companies from an operating perspective from a gap operating perspective you want to flow down to cash flows and see how the cash is moving through the business so you have a net loss over the last nine months of 404 million dollars it actually has accelerated over last year where you just lost 364 million dollars you have stock based compensation that you get to add back in dollar for dollar that is down year over year from 611 down to 435 million dollars but just understand when the stock is down over the last year 72 percent well this stock Base Line while from a dollar perspective is less from the actual number of shares is actually probably a lot more so there's actually more dilution despite the lower dollar amount they do have some unrealized looks like losses from these marketable Securities maybe and that's two that's an add back of 260 and so you come down here to net cash provided by the operating activities actually down and so this is kind of discouraging you went from 240 million dollars worth of positive cash flow last year operating side down to about 145 they invested in property plant and equipment to the tune of 35 million in the most recent quarter last year it was just 6.8 they got about 72 million in uh proceeds from these common stock options so over the last year you've increased your cast position by about 85 million dollars so from a balance sheet perspective and a cash flow perspective the company is doing just fine this company can operate like this for quite a while now is it going to be beneficial for you the shareholder no obviously these results Wall Street hates them and the stock is just kind of gone sideways stair step down and then gone sideways and we're doing that again and so if this pattern continues you'd actually expect uh really actually another leg down on this one believe it or not since you can't value this one from a price to earnings basis still we're looking at again for the full year the company is expecting we'll give them credit for two million dollars even though it's 100 million under that what you're still looking at like six seven eight times sales I'm seeing over here you've got about a 14.4 billion dollar market cap the thing with a Seeking Alpha is the stock is down six and a half percent so these market caps usually don't update probably should be better at acknowledging that here on the video but you've got about a 14 billion dollar market cap on this one you're still seven times sales on that one it's not obviously as wildly overvalued as it was us but that's a pretty flimsy argument I tell you what if you're not like City and you think that there's not further downside and there's not going to be slowing growth if you believe in Wall Street that you accelerate back to kind of a mid-20s growth rate well here's your level of support the 52-week low is at 6 44.
here we are sitting at 6.98 I'm just not convinced this level holds and on top of that you obviously have clear resistance I have this purple line in here notice that the stock has had trouble getting over just nine dollars and I understand a move from Seven back up to nine even a little higher up to 10 is a huge move in the shorter term but I I don't think a lot of you are looking at this from kind of a trade perspective this one just has the feel that it wants one more leg lower and that final leg lower actually would be the spot where from a speculative investment certainly would start to line up from a valuation perspective from a forward guidance and a revenue growth perspective if you you could get this one south of I would say like a 10 billion dollar valuation where you're only paying like minus cash on the company like two to three to four times sales on this one I actually think that would be an excellent buying opportunity so you almost need this one to get down to like maybe four or five dollars per share before it really gets interesting you certainly could take a shot at today's price but I would put a stop loss at the around the 52-week low and with all of these stocks we're covering a lot of these kind of speculative names that had a lot of interest drained out of them I would take profits maybe not on your whole position but if you were to buy say a hundred shares of a stock like this and it would go up 10 15 20 30 percent which is certainly plausible and it certainly has done that just over the past couple of months well I would absolutely take some profits on that considering the track record of this company for shareholders has been abysmal hopefully you guys enjoyed today's video be back again there's so many earnings this week you'll see me again soon good luck with your Investments
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