Why Wall Street is Freaking Out About Palantir Stock

Why Wall Street is Freaking Out About Palantir Stock

Show Video

felix here guys and we're talking patel and here  what's the deal with wall street and analysts   just sort of generally hating everything palantir  that's what i want to look at there's an actual   article out we're going to go through it and we're  going to debunk some of those myths and give them   credit where they have something right but a lot  of the time people are putting together these   things and i think it's important for us to kind  of put our views in our conviction which i think   is a term that's terribly overused to the test  so we're going to do that we're going to look at   the technical analysis we're going to look at how  it's done compared to qqq we're going to look at   institutional buys and net buys and benchmark  valuations and much much much more oh based   on a lovely article that i'll show you just in a  second guys now as always check out the um course   coupons down below guys if you want to build  lasting wealth for stock investing then check   out this stock course down below the coupon code  is moneymaker for 29 off that expires on sunday   and then the options trading course is also  launched now loads of you guys already on there   which is fantastic so you're building a great  community there in the private chat group as well   and if you basically want to learn how  to earn money make money with options and   that's a fantastic way to get and get extra  passive income again same 29 coupon money maker   so write down those coupon codes guys and remember  expires at the end of the week now do you see this   three reasons to avoid palantir well i suppose the  author's name bears of wall street sort of gives   it away rather that's generally the way they they  live but i want to go through it because actually   i like questioning my thoughts and my research  and looking at someone who writes the opposite   can actually be quite useful so we're going to do  that and i hope you're going to find it insightful   as well so it says here that the first reason  there are three why they loathe palantir stock   is that the biggest downside of valentia's  business model is that its sales cycle   could last from a couple of months to  over a year depending on the customer   and that prevents the company from easily scaling  its solutions now i think so far there is some   truth in that right it's not a you don't just  sort of go to the shop by the box and install   it tomorrow so there is definitely some lead  time there and that's what we're seeing with   you know shocker block full funnels essentially  sales funnels which is what we keep being told and   that's what we're excited about but yeah i think  you know so far okay and then he says it's safe   to assume that palantir is more of a consulting  company than a scalable sas business i'm like   consulting company do they have consultants  do they look at your stuff and tell you you   could run this company better in this way  or that way is that what they do is this   some sort of management consultancy i wouldn't  realize that they were or software consultancy   why are they saying that well they're  saying that they have a position of   forward-deployed engineer who like a consultant  works closely to the potential client for a while   learns about their business and looks a way to  help them better manage their data okay so because   they have someone competent they send in to your  business to basically make sure you optimize the   use of the software that you're paying for  in our consultancy business look any premium   service you purchase there is somebody you can  call and say how can i use this better i mean even   you buy a consumer piece of software you typically  get you know a dozen emails afterwards with two   dozen tips on how to do it better so that does not  change it from a essentially a software business   to a consultancy business so no i don't think  it's safe to assume i think it's it's nonsense   all right another downside is that they're not  performing well in terms of terms of customer   ads he says they have less than 200 customers and  they're not even one of the major contractors of   the department of defense despite working with  the federal government for nearly two decades   yes and that is the opportunity because the u.s  federal government moves slower than a snail   and they've only just gotten caught onto this  really and now we're seeing i mean literally   week after week we're getting government  contracts that are pretty sizable and they're   renewing the previous ones at higher rates so are  they i don't really quite get that part either   now they say there's a critical shortage of key  components in the automotive and other industries   it's safe to assume that businesses from those  fields would be looking for software that could   help them find weak links in the supply chain and  help them effectively whether the current crisis   in palantir should be at the top of the list  indeed it should be however so if our palantir   hasn't added a sizable number of major commercial  clients in recent months okay there was a   small little french automobile company that we  were talking about with 200 officers around the   world that are using potential scaling it up  and they did a whole ad for palantiy on that   now not every company is going to want to do a  full-blown ad with that but we do see lots and   lots of rumors and lots and lots of hiring from  jobs websites from lots of companies in that space   so yes i do think that the automotive industry is  going to roll out palantir in in a big way because   it has a major major supply issue right this huge  number of parts but again i think a lot of those   companies are dinosaurs so they're not doing it  yet and it is in the offing okay but you know   all right so far not too much offense caused  here and says the only advantage of palantir   is that it finds and structures the data better  than others okay isn't that if you want to define   valentia very very narrowly isn't that exactly  what they do that they basically present data to   you in an analytical visual way better than  anybody else ever has done and it gives you   access to all the data that you've ever had  that which nobody else seems to be able to   in a matter of of days or weeks to install so  the problem is that this software is suitable   mostly for big organizations where a lot of  business processes are involved so hang on   before you were complaining that we weren't you  know they were big people they're not using it   and you want them to use it and now you're  complaining that the software is made for   big sizeable businesses with lots and lots  of data so it says with such a high cost and   it says here five to six million is the average  range of customers it's poorer potential clients   it's significantly smaller in comparison to the  average sas uh company yes it's not a ten dollars   a month kind of a subscription with millions  of users but does that matter i mean if you   prefer those you can buy netflix you can buy  disney you can buy many many many other stocks   but that does not mean that this is a bad stock  for that reason i mean you might also think that   you know ship building is a terrible business  well don't look at ship builders right i mean   i i i don't really get here the criticism there  and then it says there is no guarantee that that   nearly 200 of his existing customers will continue  to work with volunteer software in the long run   well there is not really a guarantee  for anything in life is there i mean   apart from taxes and death i mean what what's  that a guarantee for when you're are you looking   for shares and or investments that are guaranteed  to give you certain things well government bonds   will sort of guarantee you to pay you 1.5 that  might be a place to go and it's saying that you   know amex and coca-cola stopped working with  palantir well there were a few others as well   home depot i can think of those were in 2016. i  think that was a pre-foundry product which wasn't   particularly wonderful and you know listen to alex  carp's latest interview i put it up last week the   full thing and he basically says yeah we know  we had challenges getting a commercial software   out and we made mistakes and we've learned from  them we've now got a much much better product   that everybody seems to love so all right now  shareholder unfriendliness so that's you and me   we see that the share price has been constantly  moving in the range between 18 and 30 per share   without appreciating much okay i'm gonna show you  one chart here right the red and green line is the   qqq in this time period that they got up here so  they've got this time period up here from january   till now that's their chart and that's the proof  that not a lot is happening with palantir so i've   got in red and green qqq here which is pretty  flat up 11 and then i've got palantir in the same   time space a lot more volatility obviously and  it's up eight percent so it's pretty much moving   with the market i mean yeah okay it's it's  it's done three percent less than the market   than the qqq but is that does that really  tell you anything at all i mean is this like   it has the market going up fifty percent  and palantir only three percent no it's a   it's it's almost a margin of error at this point  so again you know slightly lazy chart there right   so then we've got this excessive stock-based  compensation program so they're basically   talking about dilution here so at the end of 2020  palanti had 1.5 billion shares outstanding at the   end of the q1 its share count already increased  by 18 to 1.8 billion shares outstanding and on   top of that the latest 10 q filing shows at the  end of march 477 million options world standing   on balance with an average exercise price of 639  per share significantly below the current market   value of over 20 per share okay do you understand  i'm talking to the author here how options work   when you give them to your employees if you give  your employees options at the current market price   they don't get anything they have to pay for  those options they pay the options price so   the exercise price rather so they pay 639 and  they therefore get a gain of you know 16 or   whatever 19 that's the gain that's the benefit  that's why you do it that's why you incentivize   your staff to stick around by giving them options  if you gave them options at 25 40 which is what   palantir is as i'm recording this and they would  be getting nothing nothing at all you're basically   saying to them do you want to buy volunteer shares  from me the company or do you want to go do it for   your brokerage that would be that would be just  be nonsensical so you know that sort of sentence   makes me slightly slightly question things  and in fact they're not 477 million options   outstanding there are and this is on my patreon  guys there are about 1.3 billion of you know  

sort of options arrows use options and various  other incentive plans outstanding which is 70   roughly from memory uh dilution over the long  run but it will happen over about eight years   and this is all in the s1 this is all filed when  they went public this is not some sort of sneak   attack that came out of the bushes so it says the  options represent 26 of the current share count   and if exercised in the coming months will dilute  shareholders even more so yeah we are expecting   dilution every year for the next eight years or  so and then we have to see what's the next option   plan incentive plan they're going to come  out with so then we've got the insiders are   constantly selling stock and i think we've  covered that here fairly extensively if you   if you um i weren't part of that conversation  i talked to tom nash about it he got rather   agitated about the whole subject uh we did  some videos back and forth that you know is   this good for us is it bad for us why are they  doing it the real the reason they're doing it   it's tax so when those options vest with  the the employees they automatically sell   them it's scheduled it's set up that way and  that way they can pay their tax bill now the   richer they get those employees the more cash they  actually have received from these options and then   at some point they might be able to face that  out but at the moment that's not where we are   because basically i think the way i look at it is  that all the chaps are pallent here you've been   working there for like 15 years plus they haven't  really been getting paid a great deal i mean   you might disagree with that you might say well  you know if you get paid a million dollars as a   ceo that's a lot of money but it really isn't in  silicon valley even if you leave silicon valley it   still isn't a lot of money for for ceo pay now  getting paid a billion or something like that   that's a lot of money though that's about a tenth  of what elon musk gets paid but you know i don't   want to get into here the rights and wrong of the  wrongs of that but basically this is back payout   that's the way i look at it so because they're not  public they can do this with options and it's a   from a company perspective a relatively cheap  way to pay people it doesn't hurt cash flow so   we have actually free cash flow at palundera at  the moment uh i think 90 million or something   like that so you know there are some benefits to  it but yes you have dilution it is just part of it   so then says due to those actions institutional  investors began to add the selling pressure   as well and now here here comes the uh where  the author is slightly challenged with their   maths they say the inflow of institutional funds  increased by 2.95 billion and the capital outflow   increased by 1.82 billion so that's a net inflow  of 1.13 billion so how is the selling pressure   being put on by the institutions when there is  a net inflow of 1.13 billion so you know it's   kind of like i'm just throwing some numbers out  there and i'm hoping people will not really read   them or understand them and just think uh well  he threw in some facts he threw in some numbers   so you know he's kind of lost me there now  he's talking about evaluation he's saying it's   extremely overvalued and it doesn't have a lot of  upside now the forward price sales ratio is indeed   32x and i'm gonna show you that actually i wanted  to also show you here just the institutional   buy-ins there are you know there are significant  buy-ins from vanguard those were the last big   ones at the beginning of the of the month  we covered that in an earlier video if you   missed that check out the playlist guys  um and then we got the benchmark here   so palantir is the last line here right i'll  make this a little bit bigger for you there we go   and then i've got an adobe salesforce  snowflake i don't know why adobe's in there but   finn box suggested it so i left it in there in  salesforce's sort of your you know sas kind of   the classic snowflake it's the top line so what's  the valuation so price over the last 12 months   sales for snowflake is 103. the parents here is  39 for adobe it's 19 salesforce it's 10. um and   if we can look forward one year numbers go down  a bit but it's sort of similar so volunteer is   not cheap i i don't think any of us really think  that it is massively undervalued it's just that   there are other companies in the space like  snowflake who i think provide a worse service   who are trading at you know two and a half  times the price so again i think i would   have liked to have seen a comparison in here  to kind of understand how how this works um   and it's basically saying that it operates like  a high margin sas company even though it doesn't   operate like that well it's priced like one but it  doesn't operate like one but so again let's look   at the numbers let's look at at the margins so  presumably they think that salesforce is a um high   margin sas company now their gross profit margin  is 74 percent valentia is a 69.9 percent so   that's pretty similar right that's that sort of  you know four percent difference does it really   matter uh you know move back or forwards a couple  of quarters and i think you will you'll be at the   same number adobe 87 that's pretty good snowflake  58 not quite so good so it's kind of in range here   it's not like totally off it's kind of where  you'd expect it to be so yes it is a high   margin software company if you want to look at it  that way so again you know what are they trying   to say here so and you know what that's pretty  much all they say so it's a little bit like you   know the usual sort of lazy uh journalism  i i would say i mean i i'm not saying that   you can't criticize companies that uh that i  like of course you can and it makes us smarter   it's good to have conversations and chats  and talk to people who disagree with you   otherwise we don't really learn much and if you  really want to understand how to value companies   into your own discounted cash flow models and  really dig deep and read financial statements   all that stuff guys i'll teach you all of  that in the master stocks course down below   make a note of that discount that coupon it's  valid until the end of the week until sunday   sunday and it's money maker because that's what i  want you to be and if you do your own discounted   cash flow models you've read the financial  statements and you understand them and you   truly understand them and you compare them against  peers in the sector then the next time there is a   headline like this or that you know the stock goes  up or down five percent for no particular reason   or you know their inflation fears you understand  how all of that fits into your evaluation into   your models and what happens to it so it makes  you feel so much more confident and it makes you i   think a smarter better long-term investor because  you are much much less likely to uh sort of run   with the herd and you actually one of the things  i also teach is the whole psychology of the market   and about herd mentality and all that kind  of thing so do check that out guys down below   um that's about a wrap relief for me i i think we  can have a quick look actually before we before we   go at yesterday's day we were down fraction  of nothing and what is quite interesting is   that we sold over the beginning of the day here  and then we sort of recovered uh before lunch   and then basically powell opened his mouth and  the world panicked and ran into their bunkers   and then we came down back down to sort of 25  and then at the end of the day you can see here   massive buy-ins right so actually a lot of the  volume in the day where basically in pretty   much two trades there was one here um at sort of  220 and there was one here at the end of the day   which pulled us back out of it so i think it's a  good reaction you know the stock goes to near 25   and people are like yeah let's buy some you know  let's jump in on it and you can see that because   the people are buying here you see these blue  bars here on the right the blue bars are positive   volume the orange one's negative so you can see  people are really buying in here when we get to   sort of 25 to 10 and then again at the end of  the day there's a lot of buy-in at sort of 25   30. so it gives me confidence that people are  are going to stick to those support levels which  

is very nice to see so i you know are we going  to see massive fireworks in the next couple of   days possibly not we are still above the 100-day  moving average line which is that blue line here   which gives us support which is super important  and actually the nine-day moving average line that   lighter blue line here that was our support  yesterday as well so people are seeing this   momentum uh you know quite nicely uh sort of  surviving and we now have you know four days   horizontally that's good we're building a base  here and hopefully we're gonna take it upwards   from there and hopefully the good contract news  are gonna keep coming and i think it's just   i i do think it's a bit of a stop for the patient  i don't think this is going to give us massive   fireworks in the next couple of weeks but then  i think growth stocks are things that we should   buy and analyze and understand and if nothing  changes we should hold them for 10 years or more   and actually add to them gradually because i'm  i'm a big fan of incremental buying and again   that's one thing i teach in the stocks course  is how to kind of build positions up over time   and i think the incremental purchase structure is  is a good one it's just you have to do it through   thick and thin so no matter what the stock price  is doing you still have to do it unless you follow   technical analysis and then you can buy a little  bit more smartly and again i teach you that i   teach you the full uh technical analysis to take  you to a pretty advanced level so you can kind   of time things a bit better right guys i truly  appreciate you watching uh smash the subscribe   and the like buttons if you are so minded if you  enjoy this content it will help me out massively   with with um the algorithm sound is slowly  improving i've got a sound engineer meeting later   today so hopefully we're gonna crank things up  here a little bit more in the sort of smoothness   scheme as well on sound so thank you very  much guys truly appreciate you watching

2021-06-24 22:18

Show Video

Other news