Here's What No Else Tells You About Buying Palantir + NVDA

Summary

The 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

00:00

📈 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.

05:03

🤔 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.

10:05

💰 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.

15:06

📊 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.

Keywords

💡Nvidia

Nvidia is a leading technology company known for its graphics processing units (GPUs) and is a central figure in the video's discussion on stock performance and valuation. The video mentions Nvidia's significant growth and stock price surge, highlighting its revenue increase from 27 billion to 80 billion in the last 12 months, which is a key indicator of the company's financial health and potential for future growth.

💡Market Cap

Market capitalization, or market cap, is the total value of a company's shares of stock at their current market price. In the script, it is used to discuss the valuation of the companies mentioned, with a $58 billion market cap for one company indicating its size and investor confidence. It is a crucial metric for understanding a company's scale in the market.

💡Enterprise Value

Enterprise value represents the total value of a company, taking into account its equity, debt, cash, and other factors. The video uses a $55 billion Enterprise Value to illustrate the company's overall worth, suggesting that it has net cash on hand, which is a positive sign for investors evaluating the company's financial stability.

💡Free Cash Flow

Free cash flow (FCF) is the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. The script highlights a company's FCF growth from 300 million to 640 million, indicating a healthy and improving ability to generate cash, which is a key factor in evaluating a company's financial performance.

💡Net Income

Net income is the profit a company makes after deducting all its expenses from its total revenue. The video discusses the company's net income growth, which is an important measure of profitability and a common metric used by investors to assess a company's earnings performance.

💡Shares Outstanding

Shares outstanding refer to the total number of shares held by all shareholders, including institutional investors and insiders. The script mentions an increase in shares outstanding, which could indicate that the company is issuing more shares, potentially diluting existing shares and signaling to the market that the company believes its stock is overpriced.

💡Gross Margin

Gross margin is the difference between revenue and cost of goods sold, expressed as a percentage of revenue. The video points out Nvidia's gross margin increase from 62% to 75%, suggesting a significant improvement in profitability and operational efficiency, which is an important factor for investors considering the sustainability of a company's growth.

💡Price to Earnings Ratio (P/E)

The price-to-earnings ratio (P/E) is a valuation ratio calculated by dividing the market value per share by the earnings per share. The script discusses P/E ratios of 230 and 240 times over the last five years, indicating high market expectations for the company's future growth, which can affect the investor's perception of the stock's value.

💡Return on Investment Capital (ROIC)

Return on invested capital (ROIC) measures how efficiently a company is using the money invested in its business to generate returns. The video suggests that the company's ROIC is improving, reflecting positively on its ability to generate value from the capital it has access to, which is a key indicator of financial performance.

💡Stock Valuation

Stock valuation is the process of determining the worth of a company's stock. The video provides a detailed analysis of stock valuation, including factors like revenue growth, profit margins, and P/E ratios, to estimate the fair value of the stock. It uses this analysis to discuss whether the current stock prices of the companies mentioned are justified based on their fundamentals.

💡Margin of Safety

Margin of safety is a principle in investing that suggests buying a stock at a price lower than its estimated intrinsic value to reduce risk. The script mentions the importance of including a margin of safety when investing in individual stocks, emphasizing the need for a buffer to protect against potential losses if the investment does not perform as expected.

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