Here's What No Else Tells You About Buying Palantir + NVDA
Summary
TLDRThe video script discusses the impressive financial performance of Nvidia and Palantir, focusing on their soaring stock prices and strong balance sheets. The speaker analyzes key financial metrics, such as free cash flow and market cap, and discusses the potential for future growth. Concerns about sustainability and competition in the chip market are raised, while emphasizing the importance of understanding a company's fundamentals over short-term stock price movements. The script also touches on the significance of valuation and the potential risks of overpaying for high-growth stocks.
Takeaways
- 📈 Nvidia and Palantir have seen significant stock price increases over the past year, attracting attention from finance channels for their growth potential.
- 💰 Palantir's financials are strong, with a $58 billion market cap, $55 billion enterprise value, and a net cash position, indicating a healthy balance sheet.
- 🚀 Palantir shows impressive growth with increasing free cash flow and net income, suggesting a company generating consistent positive cash flow despite earnings catching up.
- 🤔 The increase in Palantir's shares outstanding could indicate that the company believes its stock is overpriced, a signal to potential investors.
- 📊 Nvidia's revenue has skyrocketed from $27 billion to $80 billion in the last year, demonstrating explosive growth in a short period.
- 🛑 Concerns about Nvidia include the sustainability of its growth and the competition from other chip manufacturers in the AI space.
- 📉 Despite high growth, the stock prices of Nvidia and Palantir may not always reflect their fundamentals, and investors should be cautious of overpaying.
- 💡 The speaker emphasizes the importance of understanding a company's financial story through metrics like ROIC, revenue growth, and profit margins.
- 📝 The script mentions using a stock analyzer tool to estimate a fair value range for Palantir and Nvidia, suggesting a methodical approach to valuation.
- 💼 The CEO of Nvidia's recent actions, such as selling stock, are not necessarily indicative of a bearish view on the company, according to the speaker.
- 🔮 The future of Nvidia's stock price is uncertain, and while the fundamentals are strong, the market's perception and hype can greatly influence short-term performance.
Q & A
What has been the trend for Nvidia and Palantir's stock prices over the past year?
-Nvidia and Palantir's stock prices have been soaring over the past year, with many YouTube finance channels focusing on these companies due to their significant growth and potential.
What are the financial figures for Palantir's balance sheet and market cap?
-Palantir has a market cap of $55 billion and an enterprise value of $58 billion, indicating they have net cash on hand, which could be used to pay off all their debt with cash remaining.
How has Palantir's free cash flow changed over the years?
-Palantir's free cash flow has shown significant growth, increasing from $300 million to $640 million in the last year, compared to an average of $168 million over the previous five years.
What does the increase in shares outstanding for Palantir signify?
-The increase in shares outstanding could indicate that Palantir believes their stock is overpriced, and they are issuing more shares to capitalize on the high valuation.
How has Nvidia's stock performed in the recent past?
-Nvidia's stock has had an impressive performance, being up 148% in the current year and almost 200% in the last year, despite recent fluctuations.
What is the concern regarding the sustainability of Nvidia's revenue growth?
-The concern is whether other chip manufacturers could catch up with Nvidia, which is currently at the forefront of AI technology, and if Nvidia's high revenue growth is sustainable.
What was the significant change in Nvidia's gross margin over the last year?
-Nvidia's gross margin has increased significantly from 62% to 75%, which is a substantial leap in the industry and raises questions about its sustainability.
What is the potential issue with high price-to-earnings (P/E) ratios for fast-growing companies?
-High P/E ratios can be misleading for fast-growing companies, as they may not accurately reflect the company's true value or potential for future growth.
What is the importance of the 'eight pillars' analysis mentioned in the script?
-The 'eight pillars' analysis is crucial for understanding the overall story of a company, including its growth, profitability, and valuation, beyond just the financial metrics.
What is the potential risk for investors if they pay too much for a high-growth stock like Nvidia?
-Paying too much for a high-growth stock can lead to a lack of margin of safety, meaning that if the company's growth slows or doesn't meet expectations, the investment could result in losses.
What does the speaker suggest about the future of Nvidia's stock price?
-The speaker suggests that while Nvidia's fundamentals are strong, the stock price may not continue to rise indefinitely, and at some point, the hype may not match the financials, leading to a potential downturn.
Outlines
📈 Stock Analysis: Nvidia and Palantir's Impressive Growth
The video script discusses the remarkable performance of Nvidia and Palantir stocks over the past year, focusing on their financial metrics and growth potential. The narrator admires Palantir's financials, highlighting its $58 billion market cap, $55 billion enterprise value, and positive free cash flow. Despite Palantir's increasing shares outstanding, which might indicate overvaluation, the company's consistent growth in free cash flow is praised. The script also touches on Nvidia's significant year-over-year revenue increase, questioning the sustainability of such growth amidst competition from other chip manufacturers.
🤔 Evaluating Sustainability and Market Position of Nvidia
This paragraph delves into the sustainability of Nvidia's revenue growth and its position in the AI chip market. The speaker raises concerns about potential competition from other chip makers and scrutinizes Nvidia's high gross margin, which has jumped from 62% to 75%. The discussion includes an analysis of Nvidia's stock performance, noting its parabolic rise and comparing it to the fundamentals of the business. The video also addresses the CEO's recent actions and the potential implications of his stock sales, emphasizing the importance of distinguishing between stock price and business fundamentals.
💰 Nvidia's Financial Health and Future Growth Projections
The script provides an in-depth look at Nvidia's financial health, noting its debt-free status and strong cash generation. It discusses the company's market cap and enterprise value, indicating a robust balance sheet. The paragraph also explores future growth projections, including revenue and earnings per share estimates from analysts, and questions whether the current stock valuation offers enough margin of safety for investors. The video stresses the importance of considering both the hype and the financials when evaluating a company's stock.
📊 Nvidia's Valuation and Stock Analysis Methodology
The final paragraph outlines the process of using a stock analyzer tool to evaluate Nvidia's valuation. It discusses the importance of considering growth rates, profit margins, and price-to-earnings ratios when forecasting a stock's potential. The video also shares the creator's personal valuation estimates for Nvidia, comparing them to analyst projections and historical performance. The script concludes with a cautionary note on the risks of overpaying for high-growth stocks and the need for a margin of safety in investment decisions.
Mindmap
Keywords
💡Nvidia
💡Market Cap
💡Enterprise Value
💡Free Cash Flow
💡Net Income
💡Shares Outstanding
💡Gross Margin
💡Price to Earnings Ratio (P/E)
💡Return on Investment Capital (ROIC)
💡Stock Valuation
💡Margin of Safety
Highlights
Nvidia and Palantir have seen soaring stock prices over the past year, attracting significant attention from YouTube finance channels.
Palantir's financials are impressive with a strong balance sheet and significant free cash flow.
Palantir has a net cash position, indicating financial stability and the ability to pay off all debt with cash remaining.
The company's free cash flow has been increasing, showing a positive trend in financial health.
Palantir's share count is increasing, which could be interpreted as a belief that the stock is overpriced.
Nvidia's stock price has seen a significant rise, up 148% in the year and almost 200% in the last year.
Nvidia's revenue has skyrocketed, raising questions about the sustainability of this growth.
There are concerns about competition in the chip manufacturing industry and whether Nvidia can maintain its lead.
Nvidia's gross margin has seen a significant increase, jumping from 62% to 75% in recent years.
The stock's valuation has increased dramatically, but questions remain about whether it is overpriced.
Analysts predict substantial growth for Nvidia, with revenue expected to increase significantly over the next five years.
Nvidia's market cap and enterprise value are impressive, indicating a strong financial position with no debt.
The company's cash flow is robust, with billions in the last year, indicating a strong ability to generate cash.
The discussion emphasizes the importance of differentiating between stock price and the fundamentals of a business.
The video provides an in-depth analysis tool for stock evaluation, which can help investors make informed decisions.
Investors are cautioned about the potential risks of overpaying for high growth stocks, which can lead to poor returns.
Transcripts
it's no secret that Nvidia and paler
have been soaring over the past year the
majority of YouTube Finance channels
have focused their content on these two
companies as they can't miss opportunity
and have even made predictions on how
high the stock may go I'm going to share
my thoughts about these two stocks and
what I have to say might surprise you
I'm going to be fully honest with you
guys about paler the numbers phenomenal
absolutely
phenomenal I think there's a lot of
great potential this company I think
that you talked about the balance sheet
look at this balance sheet $58 billion
market cap $55 billion Enterprise Value
that means they have net cash on hand
they could take their cash pay off all
their debt and still have cash left over
so I look at the saying what a great
balance sheet free cash flow 640 Million
last year versus 300 million net income
5ye average free cash flow 168 million
versus negative net income so they're
showing free cash flow they've been
generating years of free cash flow while
the earnings are catching up this is
okay this is great this is phenomenal
let's go look at the pillars what's the
story it's telling well again useless
fast growing company useless cash flow
grew 1.1 billion net income grew 930
million shares outstanding guys it's a
doozy for me when they're increasing the
shares outstanding they're telling you
the public we think our Stock's
overpriced that's what they're doing
right there and I don't I don't
necessarily know if they're right or
wrong on that one but that's what
they're saying they're telling you we're
so overpriced we're just going to issue
shares to all the addicts to our stock
so we can have to cash in our balance
sheet now at some point if they're
selling for a discount to enter to
intrinsic value go buy some shares back
but they should only do it at that point
but this is a young company look at this
company it is still very young this is
the the track the history that we have
publicly traded 600 million 750 a
billion a billion a billion 9
2.23 Big Time growth here profit again
the profit was a little skew but they're
now finally profitable from a banking
from a accounting perspective but let's
go look at that free cash flow I was
talking about earlier I actually want to
show you quarterly going back to
2021 88 20 57 32 74 180 86 130 300 127
Big Time free cash flow guys Big Time
free cash flow 600 million the last year
but and this is the big butt can it
justify 90 times well it's growing fast
it is growing fast let's see how much
the analysts have it growing by earnings
per share actually not as much as I
would have thought 34 cents to 83 cents
Revenue 2.8 billion to 6.5
billion 20% or more every year except
for one big time growth now with that
said my the fundamentals of paler have
gotten so much better that my valuation
has gotten better and this is the last
time I did paler back in February I did
a 10-year analysis I did eight 16 and
24% Revenue growth over the next 10
years I did profit margin of 15 25 and
35 I did free cash flow of 20 30 and
40% I was looking at going hey their
margin pretty high like Microsoft what
do they generate remember I don't have
this history we don't have much history
here so I had to do some speculation
now for PE and price of free cash so I
did 15 20 and 25 might be low might be
high I don't know I did my 9% no margin
of safety return hit the analyze button
and remember guys go click the link in
the description below to sign up for the
software so you get grandfathered into
everything but the values I have here
low side $3 to4 doll high side of 37 to
40 middle 12 to 15 bucks but paying
today's price even on the middle returns
not that great so guys Nvidia just hit
140 on June 20th it is now down to 120
it's had a couple days of of bad move
but guys this is not something to sit
there and say this is the start these
these Go I mean this company has
absolutely surg this year it's up 148%
this year in the last year it's up
almost 200% you can't possibly dictate
what the short-term future is going to
be based on anything this thing right
here is falling okay no company can go
straight up they're going to be ups and
downs but do not confuse anything here
whether you're a Nvidia bull or bear
this company has absolutely crushed it
their numbers on every single metric has
gotten way better and this is a
difference here versus like the cisos of
the past this company's Revenue 80
billion in the last 12 months let me
show you guys let me show you guys what
it was in the full year ending
2022 27
billion 23 27 billion 61 last year and
the last year 80 billion the revenue is
skyrocketing so what's the question here
the question is is this sustainable is
this Revenue going to keep growing to
the moon now the concerns I have for
this company are there are a lot of
other chip manufacturers out there is
NVIDIA on the Forefront of AI absolutely
but what's stopping other chip makers
from doing this now you might sit there
and say oh come on Paul that's gibberish
is it look at computers when they first
came out
IBM was the computer and then Dell
Gateway Micron HP all these other
companies started making computers we've
heard that like crazy about these chips
these chips are absolutely unbelievable
and people are oring them like crazy but
look at this their gross margin is at
75% now in the last year that's a huge
gross margin it wasn't that before in
previous years let's go see what it was
let's go back to
2021 the revenue was 17 billion with
gross profit of 10. 4 so it was
62% okay 62% is a lot but to go from 62%
gross margin of 75 is a huge leap
companies are happy if they go up a go
up a half percent or 1% in gross margin
to go from 62 to 75% a 20% increase from
62 to 75 don't worry the math is right
there because it's 12 13% on 6 62% is a
huge leap now question is is it
sustainable and the other question is
you look at the revenue here up three
and a half times let's look at the
profit up four and a half times let's
look at the stock since 2022 up 7x if
not more at times
6X so if this revenue is sustainable if
this Revenue growth even if it slows
down it still goes this thing might have
more running to do from a fundamental
perspective from the momentum I have no
clue guys and nobody should ever claim
to know this has been a parabolic rise
in a stock price but remember we're here
to differentiate stock price from the
fundamentals of the business these are
two very different things and right now
invidious hot you have the CEO signing
women's bras I heard a joke from
somebody recently saying that's going to
be the peak of the market right there
that's going to be the poster child for
the peak of the market is Jensen signing
a woman's bra he's a superstar right now
and for those of you out there on
Twitter saying did you know he sold $30
million of stock this week okay he has1
billion dollar of stock who cares if he
sells 30 million bucks that to me is not
an indication that he is bearish on the
company that is not at all an indication
now let's go see the story of the
company let's look at these eight
pillars to generate a story guys share
outstanding I'm surprised they haven't
been printing shares if I were them I'd
be printing shares like crazy this is an
X and it's point 0 4% give me a break
I'm ignoring that but something to not
be ignored but to be understood 230
times and 240 times price to earnings
over the last five years and price to
free cash flow now when you have a
company that's profit and cash flow a
Skyrocket like this you're going to have
very high free cash flow multiples and
earnings multiples this is not something
you want to sit there and say oh because
this is misleading number I'm the first
to say that here and guys you know how I
am about valuation and if you're new to
this I want you to hear this going
incredible business terrible number here
but this number is misleading that's why
you have to understand the story you
know why cash flow growth of 35 billion
net income growth of 40 billion High
roic Revenue growth of 68 billion off of
40 off of 80 billion dollars today this
number is absolutely skewed this is why
I say that the eight pillars are so
important to telling you a story that's
why we have the eight pillars with all
of this data here it's about looking at
everything collectively saying what is
the story here the story is very clear
this is a fast growing company the
question is is this growth going to
continue and if it is going to continue
what's the appropriate price to pay
because with fast growing businesses
you've got to understand you've got to
pay a premium for that for high quality
businesses you got to pay a premium for
that now let's see what analysts are
saying because we have that on our
software for a reason ironically the
growth isn't as much as I would have
thought now these two years 280% 102% 30
15 18 and one but you have the revenue
you have the earnings per share almost
quadrupling between the the year ending
march 2024 and then 2029 the beginning
of 2029 Big Time growth here now could
some of these analysts be skewed because
of all the Euphoria around it maybe
let's go look at Revenue 61 billion this
year going to 206 billion in the next 5
years what is that growth rate that is a
very simple calculation about 27.5% per
year growth rate in revenue is that
possible absolutely the question you
need to ask yourself is not only is it
probable is the stock currently valued
priced relative to Value enough to give
you enough margin of safety where that
doesn't happen you're still okay now I
haven't looked at the numbers yet my gut
is it's probably not but the stock has
pulled back very quickly now I want you
to remember something here forget about
what happens
soon eventually Nvidia will hit its bare
Market eventually aidia will there's
never been a time when a high-flying
stock has not been a dud to Wall Street
and a dud to the public but I want you
to remember how great this company's
financials are because at some point in
the future the financials and the public
hype will not match and the financials
will be better than people give it
credit for look at this the market cap
is 2.98 trillion Enterprise Value is the
same you know what that means no debt on
the company essentially they could pay
off all their debt and be debt free that
is the kind of balance sheet you want
remember 100 years ago you had to have
debt you had to have Factory that all
these things and these guys build things
of course and they have factories but
they don't do this they don't have to
take on debt for it they're spitting out
cash like crazy look at this 40 billion
in the last five in the last year even
though five year average is 12 a half
including that 40 billion this company's
absolutely killing it and I hope that
their revenue can continue to kill it
but even if the revenue kills it I want
you to remember there still could be
problems for the stock if you pay too
much money Intel Cisco and all these
other Darlings of the 2000.com boom are
much larger company's revenue and profit
than they were back then and they have
not hit their price Peaks from the year
2000 please rewind that 10 seconds and
hear that again because that's important
for you to understand in the short run
stocks are a voting machine in the long
run they are a weighing machine so what
is the right price to pay for NVIDIA
well I'm going to pull up the last time
I use Nvidia in our stock analyzer tool
and guys very big reminder here this
stock analyzer tool does not include the
balance sheet the good news is the
balance sheet on Nvidia is incredible
now for those of you out there looking
at this going oh this is pretty
interesting stuff because we're going to
get a lot of new viewers on this video
guess is 60 or 70% of the people
watching this are new viewers and you'll
notice if you click in the description
below that there's a weit list for our
software and the reason for that is
because the software as it exists today
includes all the tools we have to offer
for stocks retirement and real estate
all the tools but we're making some
changes behind the scene so in short
period of time that offer for all the
tools is going to go away we've been
getting a lot of feedback from our
customers and people have found that
they want to focus on one thing it's not
like Cheesecake Factory when you go
there and there's 880,000 options you
get a little rundown on it and you get
option overload people don't want that
and I get it so when you're using the
software I want you to remember I built
this thing originally selfishly for me I
wanted to be able to analyze stocks do
my retirement do my calculator on my own
but as we put them in videos the most
common comment we got was how do I get
that software so we actually just went
ahead and we built it and we are going
to continue to use it but make it right
for you cuz right now we have to
transition from making it for me to
making it for the user as we've grown it
has to be more about you than me how can
I better serve the viewer that's why
we're updating the software in order to
give people exactly what they want but
the good news is if you want all the
tools because you're the person who goes
listen I just want it all I don't care
go sign up as soon as possible click the
link in the description below go sign up
you'll be grandfathered him for life to
have all these tools that I showed you
before this is the best deal you're ever
going to be offered so go jump on it by
clicking the link so as you can tell
guys roic is getting better now the
growth rate the
first level the first line being asked
is revenue growth because that's so
important and you got to pay a premium
for high growth companies I put 10 20
and 30% over a 10-year period remember
analysts are thinking about 28% a year
I'm putting in 1020 30 for the next 10
years profit margin I did 30 40 and 50%
same thing here because even though this
is high you're going to get more
competitors don't get me wrong guys
you're gonna get competitors now they're
able to kill it awesome now PE I put in
2025 and
30 if somebody said to me Paul I'm
putting in 18 or 20 I'd get it because
this is a high-flying company and we
don't want to be biased by what we see
right here this is not the true
indication I mean it's very hard for
companies are selling for 70 times
earnings to get a really high return
I've back tested companies that were
high pees because they were perceived to
be great companies and the returns are
terrible going back 25 or 30 years
absolutely terrible if you bought the
high growth high PE companies because
what ends up happening is people tend to
overpay for those now desire any return
I'm just doing nine or 10 per. there's
no margin of safety in here and when you
get the software you need to put margin
of safety when you buy individual stocks
because then I ask one question from you
why are you buying individual stocks if
you want to match the market you got to
put a higher desired return in for that
margin of safety hit the analyze button
all right got a low price of 30 high
price of 320 a middle price of 103 and
this middle assumes 20% growth rate and
some pretty decent margins so it still
feels overpriced but remember this thing
has grown its value so significantly
over the last few years so significantly
I probably had this thing valued at 15
bucks for but they their fundamentals
have gotten so much better from an area
that nobody saw Happening Now guys if
you want to learn more about my process
for buying stocks watch this next video
thank you very much for your time
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