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time to talk about palantir technologies ticker symbol pl tr this has to be one of the most overhyped stocks that i have seen here on youtube but also on sites like sticking alpha take a look at the last dozen or so articles that were written on this stock over the last few months we've got buy strong buy buy buy buy strong buy buy buy buy strong buy everybody has been pumping this stock and over the last year it is down 49 it's been one of the worst performing stocks that you possibly could have owned we'll come over here and take a look at this from a technical perspective as it's pulling back to an ipo price back at about 10 per share we'll talk about is there demand for the shares at this level and obviously as the stock continues to pull back now we have a 28 billion dollar market cap on this one instead of it being much higher in the past talk about is the valuation starting to make a little bit more sense since if you've been following our channel the valuation and this company's revenues have made absolutely no sense from a valuation perspective we'll talk about when we get over to the revenues the profits all those types of things we'll talk about is it making a little bit more sense considering the stock price has just fallen off a cliff now in terms of what's driving the stock today the stocks down about 11 after reporting earnings it seems like every time this company reports earnings the stock just tanks and q4 was no rare exception we had revenues coming in at 432 million dollars that was 34.4 year-over-year revenue growth it did be the expectations by about 14.73 million dollars now when we come over here to the financials we'll see for the full year the company did about 1.5 billion dollars again we have to remember this is a 28 billion dollar market cap company maybe give them credit for another 30 revenue growth next year you're sitting at about 2 billion dollars worth of revenue still mildly overvalued but certainly not where it was in the past when this stock was much much higher than this in terms of the upcoming quarter so we got guidance for q1 we're expecting revenues at 443 million dollars that was over consensus estimates at closer to about 440 million dollars adjusted operating margins coming in at 23 we'll talk about when we look at this company the fact that they have incredibly high gross margins and so i can understand some of the bowl case arguments when we look at these financials but in my opinion the hype kind of got out up in front of this stock and certainly kind of got this stock out in front of its skis and we've obviously seen it pull back oh like a lot of stocks over the last few months or so now the company is projecting annual revenue growth at about 30 or greater through 2025 that should increase the odds of this company actually turning a profit at some point now i'm gonna shrink this down a little bit get us a little better view of this now we come over here to the financials i tell you what if you've been watching youtube videos about palantir i'm not going to tell you who to watch what to watch but if they're not bringing up the financials if they're not breaking these down for you i don't know exactly what value they're actually doing for you instead of just basically over hyping a stock that is down over 50 over the last year so we're gonna dive into these numbers if this is something that you have not seen before you need to really start bringing these up before you invest in these very speculative companies like palantir we had revenues like we talked about 432 million dollars worth of revenues that was 34 year-over-year growth we see that here we went from 322 last year all the way up to 432.
you see for the full year you went from about 1.1 billion up to about 1.5 billion now what i love about this company and i've never ever criticized about this company and in fact this is why we continue to cover this company because there actually is some stuff here this cost of revenue look at this only 87 million dollars so you only have to spend 87 million dollars to make this 432 that gives you gross profit of 345 million dollars these are some of the highest gross profits i have seen in the stock market quite frankly take a look at for the year end off of 1.5 billion dollars worth of revenue you clear to the gross margin side 1.2 billion dollars now wouldn't it be awesome if that was it those were our only costs while i think some people that are over hyping this stock they actually stop right here and i can understand that there's an argument to be made here but unfortunately that's not the full story we've got other operating expenses over at palantir we've got sales and marketing that went from 147 up to 162.
when you look at a company like this i think you can imagine this company is not making money when you look at the stock chart of this company if they were making money it would probably be doing the reverse and so when a company is not making money what we want to see is these operating expenses start to flatten out because the company has given us guidance that they're going to grow their revenues by 30 so you can model that out you could take the revenue that they just did 1.5 billion and be conservative and then add another 30 for 2022 add another 30 percent for 2023 i mean they modeled this all the way out to 2025.
so we know within a certain reason where their revenues and to a certain degree where their gross margins are going to be four years out what you want to see with palantir is they start flattening out these operating expenses and we actually saw that in the most recent quarter take a look at this we went from 408 down to 404 this is exactly what you should have been waiting for with balanteer instead of jumping into this stock you could have waited until these operating expenses started to flatten out because look what it did from this loss from operations perspective we were from a loss from operations perspective last year at 156 it improved we're not positive on our income from operations and i think you could probably potentially even wait to invest and palantir until they actually start turning a profit right now on a quarterly basis they're losing about 58 million dollars it looks like to me if they continue this cost structure they're actually at a tipping point within the next two to three to four quarters they're likely to be either cash flow even or maybe a small net gain on their income from operations you see over the last year paint's a very similar story as well you went from a 1.1 billion loss last year this is when we were making videos here on the channel saying we don't like this stock these are negative trends from an operating perspective well they're starting to turn the corner a little bit they're not great but they're a heck of a lot better when in the most recent year you lost just 411 million dollars now what some bulls are going to argue is a lot of these costs or some of these costs are stock-based compensation but we're actually seeing a more increasing of cash being used you see here in 2020 on a quarterly basis it's total stock-based compensation based on these costs your sales and marketing general administrative and your research and development cost that total was 408 of that 408 million 241 million was actually not cash it was actually shares of palantir now you see for the most recent quarter that we just did we have almost identical amount of operating expenses in fact it went down by about four million we went from 408 down to 404 but notice where stock based compensation went went down considerably down to 166 million so what does that tell you they're obviously compensating their employees a little bit less from a stock based compensation perspective but they're having to use more cash okay as your stock does this your employees and attracting good ones and retaining them you might have to start giving them cash because obviously they've seen the value of the shares that you awarded them last year declined by about 50 and so there's kind of a catch 22 when it comes to share based compensation when your shares are doing well and the employees want them and they desire them sure it's a good substitute for cash but when your stock has been absolutely decimated like palantirs has well guess what you're going to have to reward your employees with more cash compensation than stock based compensation and we've certainly seen that over the last year in terms of what palantir has done now in terms of their balance sheet looks really good okay they still have about 2.2 billion dollars worth of cash it's a company that hasn't been around that long and they don't really have a lot of debt and so they've done a really nice job over at volunteer this is about as crystal clean balance sheet as you can get so you don't necessarily have to worry about this at the current time okay and on top of that it looks like they're starting to move in the right direction from a cost perspective now let's come down here to cash flows because some of you might be saying well this company awards a lot of stock based compensation and you would be absolutely correct here it is from a cash flow perspective last year you awarded executives employees 1.2 billion yeah 1.2 billion dollars worth of cash base stock-based compensation last year on one billion dollars worth of revenue so does that make a lot of sense not really and that's also another reason why i've recommended avoiding this stock in the last year or so now things are still not great okay we awarded 778 million dollars worth of stock based compensation off of 1.5 billion dollars worth of revenue and obviously you come down to loss from operations it's exceeding that we basically gave away 50 of our revenues in terms of stock based compensation so it still doesn't make a lot of sense from that sense to me but from a casual perspective things have gotten a lot better okay you pull down this net loss of 520 you get to add back in this mammoth stock based compensation you come down here and cash flows have actually turned positive that is absolutely great for this company because you went from negative 300 million last year all the way up to a positive 333 million dollars now they're still exercising common stock options they've tapped this stock a lot that's why this balance sheet looks really good is because they've used this stock basically as an atm enter in terms of raising money for the company but also compensating employees as well and so look there's some things i actually like a lot better about palantirs financials right now the fact that their costs have actually flattened out over the last quarter and on a yearly basis actually went down considerably from 1.9 billion down to 1.6 billion i still think this stock based compensation is egregious but as the stock continues to hang down here in under about 18 dollars per share and continues to perform poorly it's going to be difficult for this company to continue to attract and retain talent with a stock that is not performing so they're going to have to get this thing turned around if they're going to want to continue to use that otherwise they are going to have to burn through a little bit more cash compensation and that could impact the balance sheet at some time but i don't necessarily think that time is coming anytime soon with palantir all things being considered pretty strong from a balance sheet perspective and things are improving from an operating perspective now hopefully in fact most of you that are watching if you own this stock you are considered a bag holder on this one especially if you bought it over this area of support that we identified a while ago at 18 per share once the stock broke through 18 i mean it tried to hold this level this stock was defended pretty nicely at 18 and i was actually pretty surprised when it broke down it was gonna get ugly and here we are sitting all the way down here at 12 per share there is some support for the shares but unfortunately it's all the way down here at about under ten dollars per share i think you're upside in this one so some of you are wondering should i buy the dip on this one should i average into this one should i you know should you dollar cost average into this one understand your upside is probably back up here to 18 okay because this area at 18 was an area of support here it was a significant area of support back in december and then once we broke down through that then now it acts as resistance on the way back up so even if we put up some green candles on this one i would expect us to meet some resistance back up here at 18.
but look it's 12 stock it goes to 18. that's a 50 rise in this one okay so if you want to play that from a technical perspective i could understand that just understand as well your downside is back down to probably back down to nine dollars per share on this one maybe even eight dollars per share so you've got about four dollars in downside on this one at the current price and you've got a little bit higher than that about six dollars in upside on this one it it was in the shorter term this one looked like it was starting to reverse a little bit you were creating some smaller sets of higher sets of lows here but unfortunately after reporting earnings that kind of wiped that out but there appears to be some support for the shares right here at twelve dollars per share at a 28 billion dollar market cap and growing your revenues over the next three to five years 30 or more there's some argument to be made that they'll be able to grow into this 28 billion valuation now what we'd probably want a little bit more clarity on it are these costs going to retain at this 400 million dollar level because if they do this company is likely to turn a profit at least from an operating perspective here very soon and so there's some things to like about this stock but look if you're in this stock if you bought into the hype here on youtube seeking alpha anywhere out there just understand with these speculative stocks you can always almost always take your time especially with not a public facing this wasn't a tesla where you could get out and drive the car it's not an amazon where you get the packages delivered to you sit around a table of 20 people and talk to them about palantir and nobody's gonna know what this company does and so there is some of that as well and i know that's not anything traditional valuation perspective or anything traditional fundamental basis but there is something to that when you have consumer facing companies i've seen a lot of people compare palantir to tesla and amazon nobody knows what palantir does and so you can be patient into this one i would wait for this one to find its footing down here at the 12 level i wouldn't necessarily jump in here at these levels because the sentiment in this stock in the longer term is still down we're making lower sets of highs all the way around and in fact we just confirmed that more recently that these highs at 14 was another lower set of highs that were up here at 19 and the other initial set was up here at 27.
i would wait to see how this one bottoms out it wouldn't surprise me if it comes down here and test the 10 to 9 range that is where the valuation could make even more sense especially considering this growth rate there's some things we like about palantir the fact that the stock price has pulled back so much is starting to make this one look way more attractive than it did a year ago if you are in this one and you've lost a lot of money take lessons from this make sure you do your own due diligence and maybe draw the line on not investing in companies that were this wildly unprofitable last year and even parts of this year wait till they start turn things around my best advice is actually wait until these loss from operations turn positive to be quite frank the stock could be even lower than that when this company finally turns a profit that is when palantir could actually be a strong buy hopefully you guys enjoyed this video be back again soon with more good luck with your investments
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