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When it comes to Palunteer stock, we have been seeing some pretty impressive developments as of lately. And as we know, revenue growth has been impressive. Commercial demand is expanding and profitability is strengthening. But Michael Bur is still against it. So what is he seeing that bullish investors might not be seeing?
And what might they be overlooking is the question. and does a strong business automatically justify the price that investors are paying? So today we're going to be breaking down the articles. Um we're going to be breaking down three articles specifically that cover Palunteer and talks about the rally we've been seeing with Palunteer.
We're going to be looking at Bur's bearish outlook and the numbers that could help decide which side has the stronger argument. Now, before we get into it, uh, feel free to please join our free Invest Q community because every Monday around 5:00 PM Eastern time, I host a community live stream where we talk stocks and answer and answer any questions that you have.
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And as always, this is for educational and this is for education and discussion. This is not financial advice. These are my personal opinions based on public information. So, with all that out of the way, let's start off by doing one thing that I want you guys to do with me together is separate the recent business performance from the stock performance of Palunteer because uh because again those are two completely different things.
And in an October 6 article yesterday, it reports that Palenter gained approximately 60% 60.3% right here. Uh well, it's approximately well the headline says 60%. But if you scroll down, you're going to see it says 60.3%. And this is for regarding the third quarter. However, the same article puts its year-to-ate gain at only around 6.55%.
And the reason that matters is because a massive quarterly rally can make it sound like the stock has been moving straight up all year long. And in this case, a significant portion of that move was recovering ground that was lost earlier. And these are figures from the article's publication date rather than a live price update.
And even though it's not live, this was only reported yesterday, so it's still pretty it's still pretty fresh. This is still a new article. And the business results help explain why investors have become more optimistic on Palunteer. And according to the earnings, uh some of the earnings figures that were cited in this article on August 3rd, on August 3rd, you're going to see here that quarterly revenue rose to 93%.
The dollar amount was $1.93 billion and US commercial revenue jumped 149% to $764 million and the stock gained 29% the next day. Now, those are substantial increases and the commercial number is especially relevant because it shows businesses spending that businesses are spending more on Palunteer's products beyond its government customer base.
And for investors, the question becomes whether that demand can keep expanding and how much future expansion the stock already assumes. Now, let's look on the flip side of things. There's another article that I want to discuss with you from Investors Business Daily, and Michael Bur has become a I don't want to say hot topic, but somebody that we've been talking about a decent amount of times recently.
One was with Palunteer, and another one was with another AI stock. I can't remember which one, but this is the third time I'm going to be talking about him on this channel within the past like two or three weeks. But this article reports that Michael Bur believes investors are underestimating the risk of the AI trade.
and he believes that it's reversing. And it also describes, this article also describes bearish positions involving Palunteer and several other AI related companies. And just to be clear, this is Bur's investment thesis. It's not proof alone that a crash is coming or that his timing will be correct because as we know Michael Bur is very famous in the investing world because Michael Bur his reputation comes from identifying problems ahead of the big 2008 uh financial crisis that happened.
All of you already know about that and that's why his views are seen as interesting in the investing world. But every new prediction still needs to stand on its own evidence. And the article also discusses his concerns about memory chip supply and pricing. Now, we need to be careful here. Palunteer is a software company.
A prediction about increased chip production and lower memory prices does not directly explain why Palunteer's revenue would decline. The connection is broader. And if investors become less enthusiastic about artificial intelligence, they could become less willing to pay extremely high valuations across the sector.
And a stock, it can fall because investors lower the multiple that they're willing to pay even while the company continues to grow. And this is where the debate becomes more interesting because one article um well actually the article recently uh that I just point pulled up for you. But again uh the first article that I mentioned talks about this right here about how it places Palanteer near 100 times forward earnings and another uses approximately 116 um 116.9 times.
So those estimates do differ. So me personally, I'm not going to treat them as one precise universal valuation because that's not that's not the case here. Forward earning multiples depend on the share price, the earnings estimate, and the period being measured. But the thing about it is um these articles make the same broad point.
And that broad point is investors are paying a substantial premium for Palunteer's expected profits. Now, for a simple example that I want to give you guys, just take a second and let's just I'm trying to do this in a way that's easy to explain. Imagine for a second that a company expected to earn $1 per share with its stock that's priced at $100.
That would be 100 times forward earnings. So, if expected earnings increased to $2 per share, but investors became willing to pay only 40 times earnings, the implied stock price would be $80 and expected earnings doubled, yet the stock price fell. That is a hypothetical example and it's not a palunteer price prediction.
It shows why business growth and stock returns can move in different directions. The articles also compare um Palunteer with Microsoft. That comparison gives us some perspective. Um that gives us some perspective, but they are different businesses with different sizes. So I don't want to confuse the two because again regarding revenue mixes and growth rates, they're all different.
So, Palunteer's faster percentage growth supports an argument for a premium, but it does not by itself tell us how large that premium should or should not be. And the bullish argument um has more behind it than just a rising share price, which is what usually catches the attentions especially among retail investors, just the share price alone.
People just like to look and see a stock surge. They overly panic when a stock drops. That's what catches the attention. But again, we like to look at the fundamentals and we like to look at things behind the scenes. And another article I want to talk about is this one right here on LinkedIn. And the person, it's right here under this, I'm not sure what this is, like a user pulse 2.0.
But anyways, this article, it report that Palunteer did close 220 deals worth at least $1 million during the quarter. And that's including n uh 98 that were worth at least 5 million and 73 were worth at least $10 million. Now those categories overlap and just to be clear we should not add them together and call that 391 separate deals.
But what they do suggest is that Palunteer is signing a meaningful number of large customer commitments. Now all these things put together do help support the argument that customers are making larger commitments to the platform. But we do need to be clear here that remaining remaining deal value is not the same thing as revenue that has already been earned and it is not the same thing as cash excuse me as cash that has already been collected.
And speaking of the bullish argument, another point that helps um solidify that is profitability. And if we take a look at this article from Trading Key and we scroll down and you look at this section right here that talks about what the numbers actually say, you're going to see a few financial um key metrics that are highlighted here that do help support the argument.
First off, starting with the $ 1.062 62 billion in gap net income with a 55% net margin and approximately $1.22 billion in adjusted free cash flow. And they also reported approximately $9.22 billion in cash and short-term securities. And those are different measures and we should keep them all separate.
and net income. Net income is an accounting measure of profit. Free cash flow is uh looks at cash generation and the figure cited here is adjusted. So its definition and reconciliation matter and the article also cites a 47% gap operating margin that measures profitability from operations while the net margin includes items below operating income.
The important takeaway is that discussion is about a company reporting substantial profits and cash generation alongside rapid growth. That strengthens the business case. The remaining debate is how much investors should pay for it. And looking ahead, the articles site thirdarter revenue guidance of 2 uh 2.160 billion to $2.164 billion and fullear revenue guidance at approximately 8.15 8.15 billion to 8.158 billion.
Now those are management's expectations, not completed results. And here's what I will personally be watching. First off is going to be whether or not revenue meets the guided range and whether the outlook afterward supports continued growth. The second thing I would be looking for is whether US commercial demand remains strong.
And that has been an important part of the bullish argument. Third thing I'm going to be looking for is whether profitability and cash generation hold up as the company expands. And the fourth thing I'd be looking at is whether large customer commitments keep converting into recognized revenue. A strong earnings report, it can support the business thesis.
Whether it supports the share price also depends on what investors were already expecting. And my own personal view is that the articles that we looked over today and other articles that are out there, uh, it does show why Palunteers debate remains so divided because the bulls can point to rapid growth, larger deals, substantial profits, and strong cash generation.
Meanwhile, on the flip side, the bears, they have their points as well because they can point to a valuation that requires a lot of future success and uncertain. They also can point to uncertainty around contract conversion and the possibility that enthusiasm for AI is starting to cool off. And Bur specifically, he's one of those investors that's very bullish or not bullish, very vocal on his bearish stance.
And Barry being bearish to be clear does not automatically make the bulls wrong. And a 60% quarterly rally does not automatically sell settle the valuation debate. And for me, the question is how much growth Palanteer can deliver from here and how much of that growth investors have already paid for.
So if you found this breakdown useful, please feel free to hit the like and subscribe button below and let me know in the comment section what it is you think about Palunteer. Are you more bullish, more bearish? Just let me know in the comments below as I do love engaging with you guys. But Qu Out, stay safe and I'll see you on the next
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