The end of Palantir? (Why $PLTR is down and keeps dropping?)

00:01

well paler just had one of its best

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quarters of all time it beat on every

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possible metric its Revenue was better

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than expected earnings per share was

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higher than expected and it gave great

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guidance for the rest of

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2024 and yet the stock was down heavy

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right after earnings came out and of

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course the big question here is what the

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hell is going on why did paler had such

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a great quarter and it still dropped

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like a stone what just happened here now

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in this video I'll do a few things

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number one I'll explain to you what

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exactly happened what led to this but

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more importantly I'm going to show you

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why this is probably one of the best

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quarters paler has ever put out and why

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this earnings call made me more bullish

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about paler than I have ever been and

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trust me I have been quite bullish

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before this earnings call so this is

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very impressive stuff so let's start

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first of all with what happened here now

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you have to think about crowd psychology

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think back to what happened with Tesla

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everybody were convinced that Tesla is

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going to have absolutely horrendous

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earnings and the stock sold off like

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crazy leading up to the earnings

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everybody was saying hey I'm going to

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wait for the stock to crash once it

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crashes I'll buy back right after

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earnings at least the Bulls what ended

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up happening is this rubber band effect

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where everybody were convinced something

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is so horrible so horrific the minute

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the earnings came out from Tesla and

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they were not the worst the world has

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ever seen it wasn't the end of Tesla

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that spring got released and Tesla flew

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up and then corrected back but generally

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flew up like crazy now that happened

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because the expectations were so

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horrible that no matter what Tesla put

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out basically it meant that the stock

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would go up now very similar to this

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palente did the same thing from the

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other side and everybody were so

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convinced that paler will have such

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great earnings it will blow everybody

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out of the water which they did but

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because the level of expectation for the

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stock for the earnings was so high palen

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literally needed to come out and beat

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like nobody has ever beat before to meet

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that expectation level the stock

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increased by 8% in a single day leading

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up to the earnings it did 20% over the

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past two weeks leading up to the

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earnings so that lead up that buildup

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that 20% increase we've seen in paler

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stock just before earnings that was the

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setup that was very hard for paler to

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meet the minute the earnings came out

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and it was just a normal beat it was

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well below the threshold of what the

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market has already priced in and then it

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started correcting and then the

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Avalanche started because once it start

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selling off there's a lot of algorithmic

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trading especially in after hours and

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then you saw the Avalanche come down

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that's the gist of it that's what

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happened with paler does it matter to me

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as a long-term investor should it matter

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to you as a long-term investor not at

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all I mean it's pretty much irrelevant

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it's a fart in the wind who cares but it

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does matter to a lot of people who are

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unsure about this company who are unsure

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about its potential and that's why I'm

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here to explain to you and I've said

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this during the earnings call we had a

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beautiful live stream almost three hours

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phenomenal guest and I want to thank

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everybody who came on the live stream

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and one of the things I've said is that

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my bottom for this company my floor for

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the next five years is Salesforce so I

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see this at the very minimum about $250

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billion market cap which is basically 5x

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from where they are right now at the top

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I see this is a Microsoft equivalent

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which is easily 20x from this point on

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so you see that I'm not bothered by this

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and in fact I'm quite interested in this

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stock price if it keeps dropping I'm

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just going to be more excited I'm going

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to be dcing even harder which is

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something that I've never used before

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hard dcing that might need to go on a

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t-shirt but you get what I'm saying here

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now as far as the quarter itself I mean

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when we look at the numbers I can't help

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but just being absolutely impressed by

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what they've done especially in this

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climate in this economy in this

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environment with this geopolitics look

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let's look over the numbers here and

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I'll start from the bottom and work my

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way to the top so one of the things that

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I was so critical of paler over the past

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few quarters is the deine deine in the

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net dollar retention in a SAS business

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in a software as a software business

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it's very important to have recurring

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Revenue right not only recurring Revenue

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but increasing recurring revenue and the

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way you measure this is with net dollar

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retention that's a very tricky metric

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but it's super important for paler

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essentially paler came in into this call

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with a net dollar retention of 108%

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which means that they have built all

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their clients on average 100% from what

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they've paid last year and 8% above that

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that's not bad but it's definitely not

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as good as some of the other SAS

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Superstars out there like snowflake now

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this 110% we got is an improvement

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especially when the 108% was already an

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improvement from the previous quarter so

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pante here is now improving the net

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dollar retention two quarters in a row

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now I definitely want to see this going

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into 20% which is where I think paler

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should be and that trajectory really

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really makes me confident what they're

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doing the other thing I like here is the

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fact that we have 9% growth

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year-over-year for the top 20 customers

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of pener now 9% growth year-over-year

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that doesn't sound exciting who cares

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well hold on a second you'll care in a

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second you see the top 20 clients of

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paler they generate a lot of criticism

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for the company because of you know

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concentration right if the top 20

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clients basically are half your business

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you have a risk right it's a

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concentration risk client concentration

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risk but the flip side of this is when

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those top 20 customers that generate

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almost half your business have increased

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their spend by 9% per client year over-

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year that means that everybody's paying

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on average $55 million per year from

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those 20 customers which means that the

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Thor brats the clients that they care

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about they're increasing their spending

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every single year and if you go back

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through the earnings that 9% number is

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always there their top 20 customers

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consistently pay more every single year

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and they don't leave now the other thing

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that blew me away was the net income net

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income for penter get this is up

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450% from $19.5 million to $16 million

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that is absolutely insane from 9 and a

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half to 106 that is a wild increase in

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efficiency in scalability in

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profitability on the one hand we have

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Revenue growth of 21% on the other hand

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our cogs cost of goods is only growing

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by 8% and the entire operating expenses

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are only growing at 6% so if you can

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give me a company that's growing

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revenues by 21% but only growing

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operating expenses by 6% that company is

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growing faster and faster it's faster

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it's expanding it's not only getting

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better it's getting better twice it's a

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double dip now even if you look at the

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balance sheet which we all know is

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beautiful for paler they have four

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billion in cash no debt but even there

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they find places to get better assets up

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7% year-over year liabilities down 7%

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again the company that's increasing its

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assets decreasing liabilities at the

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same time usually these things don't

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happen you usually don't see this where

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$4 billion do no debt more assets and

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liabilities four times more three times

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more and the Gap is expanding it's

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absolutely insane now even if you look

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at data like Revenue per employee which

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a lot of people are really not that

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excited about but I think it's a really

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good gauge of how good paler is paler is

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currently generating about

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700,000 Revenue per employee that is

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insane it's not as good as Microsoft or

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Google or meta which are probably

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towards the you know a million give or

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take but it's in the upper echelon of

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companies they're definitely in the

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league of the top tier companies in the

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world if you compare that to snowflake

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for example n generates about 500,000

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per employee with 113 priced earnings on

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a forward basis versus peners 58 which

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we'll talk about in a second and a

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negative net income versus palente

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positive net income and with the same

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amount of Revenue of $2.8 billion per

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year so not to hate on snowflake but I'm

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saying it's a good Benchmark to show you

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how good paler is at profitability

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scalability now if youve already

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mentioned this I'm going to kind of move

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on from this point and I'm going to talk

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about PE everybody criticizes paler for

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having a very high price to earnings and

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I've been saying this for the past year

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I've been saying look guys the PE that

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you're seeing on Palante right now

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that's the first PE the second PE they

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just turned the profit they just turned

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the corner so they're essentially just

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basically broke even so it's not really

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the good comparable right now this is

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the evidence I've been talking to about

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look the PE was 200 just a year ago it's

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currently 4 PE of 58 not saying that 58

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is low but 58 versus 200 in a year just

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show you that closing their Gap penter

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is slowly growing into their valuation

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the same way Tesla did the same way all

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great companies do you know that's

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saying time is the best friend of a

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great business and that's specifically

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true for the stock market and for

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multiples that 58 for PE p doesn't have

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an exuberant crazy PE anymore so another

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fud gone out the window right now we're

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talking about a company that generates

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21% Revenue growth but that Revenue

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growth is just the tip of the iceberg

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you can see the potential of the revenue

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growth the one that's in the pipeline is

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a lot bigger and I'll show you look we

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have about 40% of us commercial growth

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year-over-year

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14% quarter over quarter we have 70% us

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commercial customer growth year-over

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year those numbers are baked in in into

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the cycle of paler but they've not yet

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translated to revenue growth there's a

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lag there's a life cycle of a customer

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on boarding and it's not the only place

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where you can see this look at the US

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commercial remaining deal value it's up

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74% look at the total contract value

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it's up

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131% this lag will eventually close and

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will increase the revenues out of the 21

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region into the 30s that's inevitable

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because paler at this price at this

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stage it's still a very early stage

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company people tend to think about paler

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this massive 20year Behemoth you have to

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remember that the commercial stuff of

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penter just started

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2017 when you think of penter think

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about commercial versus government

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completely different businesses this is

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a young company this is you getting in

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on the ground level it's not cheap

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there's a lot of growth and success

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baked in into this price but so far over

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the past five quarters they've done

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nothing but execute and deler

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and they've definitely gotten my trust