Why Wall Street is Freaking Out About Palantir Stock
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
