Palantir Stock Review
Time Codes
- 0:00 – Intro
- 00:25 – Palantir journey
- 1:00 – Palantir News
- 02:07 – EPS
- 10:15 – Mos
- 10:32 – Meaning
- 11:27 – Palantir Competition
- 15:07 – Moat
- 15:25 – Management
- 16:26 – Conclusion
Looking for more stock reviews? Check out our previous stock review.
Transcription
[00:00:00.370] – Sean
So what is going on with talent here? In this video, I’m going to talk about the latest earnings report, and then.
[00:00:05.650] – Sean
We’Ll jump into a 4Ms analysis. We’ll look at the margin of safety.
[00:00:08.830] – Sean
Within Tykr, and then we’ll look at the meaning mode and management.
[00:00:12.250] – Sean
And then I’ll talk about what I.
[00:00:13.660] – Sean
Plan on doing with the stock moving forward. Full disclosure on a long term investor in Pallandeer. Let’s dive in. So let’s quickly highlight the journey of this stock. So Palantir went public in September of 2020 at around $9 a share. A few months later, it went up to $35. And since then, it’s been on this slow decline ever since. And with the economy the way it is, especially with this bear market, especially tech stocks, Palantir has really not been a great performer. In fact, the latest earnings report caused it to go under $10.
[00:00:52.130] – Sean
I think today is somewhere around seven.
[00:00:54.780] – Sean
Point $80 or something like that.
[00:00:57.510] – Sean
But overall, let’s dive into what’s going.
[00:01:00.440] – Sean
On with the stock.
[00:01:01.210] – Sean
So we’re going to talk about the.
[00:01:02.050] – Sean
Good news in the earnings report and.
[00:01:03.700] – Sean
Then the bad news.
[00:01:04.600] – Sean
So good news is total revenue grew by 31%, which is great commercial revenue.
[00:01:11.510] – Sean
They have really two segments.
[00:01:12.900] – Sean
They focus on commercial, in other words, businesses and then government contracts. So with the commercial segment, they increase.
[00:01:20.950] – Sean
Revenue year over year by 54%.
[00:01:23.300] – Sean
Within the US, commercial revenue increased by 136%. That’s awesome. The issue is on the government side, it only increased by 16%, not nearly as high, but the customer count did increase by 86%. So let’s talk about the negative here.
[00:01:41.100] – Sean
With every earnings report that comes out.
[00:01:43.210] – Sean
That’S every quarter there are two numbers that analysts and institutions are looking at. Two key variables.
[00:01:51.030] – Sean
There are numerous others, but the two.
[00:01:52.400] – Sean
That stand out the most would be EPS and revenue. So in this case, revenue did beat expectations just by a little bit, like by point 64%. So it’s not huge, but it still beat expectations. But the miss was EPS was expected at came in at $0.02. So the stock went it was just north of $10 and it went under $10 a share. So let’s continue diving into some of the news here, especially with what others have to say. I’m going to kind of piggyback off a YouTuber. His name is Sasha Jenson. He had some really good comments on this latest earnings report, and a few of them align with a few I do not.
[00:02:38.740] – Sean
But let’s just start with the items.
[00:02:40.120] – Sean
I do not agree with.
[00:02:41.050] – Sean
So first off, he talked about there’s.
[00:02:43.350] – Sean
A negative sign that government revenue is declining. And I’m okay with that. The reason is when you look at government institutions and how many businesses there.
[00:02:53.530] – Sean
Are, there are not nearly as many.
[00:02:55.690] – Sean
Government institutions you can serve.
[00:02:57.370] – Sean
It’s just the logic makes sense.
[00:02:59.500] – Sean
There’s tons of enterprise businesses, big businesses, and there’s a lot of small and mid sized businesses, which Palantir hasn’t tapped.
[00:03:07.470] – Sean
In yet, but we’ll talk about that in a little bit.
[00:03:09.620] – Sean
But with the enterprise side, it’s an open field.
[00:03:13.260] – Sean
They can serve a lot more. So that’s where that growth opportunity sets. That’s where you and I should be focusing on this stock if we’re investing in this business, the government side, I think that’s nice to have, but that’s not the long term focus with government.
[00:03:27.880] – Sean
Contracts and businesses that I’ve been aware.
[00:03:31.690] – Sean
Of that have worked with the government is you’re typically not signing a government.
[00:03:35.690] – Sean
Contract for like a year or two.
[00:03:37.090] – Sean
These are really long relationships. The government does a lot of homework up front, usually over the span of almost a year or more to really determine if your business is the right fit, and then they engage in a relationship in a contract that can be.
[00:03:51.790] – Sean
Over a decade long.
[00:03:53.230] – Sean
Not always, but I’ve seen this happen in many cases, so that’s great. These are going to be long term clients.
[00:03:58.950] – Sean
That’s the goal.
[00:03:59.940] – Sean
But the focus, of course, is on the enterprise side.
[00:04:02.640] – Sean
So I do have to disagree.
[00:04:04.390] – Sean
I don’t think that’s a negative thing.
[00:04:06.010] – Sean
That the government revenue is slowing down.
[00:04:08.230] – Sean
I’m completely okay with that. I like to see that enterprise and commercial increase in now, another thing I’d.
[00:04:15.880] – Sean
Like to talk about here that I.
[00:04:17.300] – Sean
Do agree with and I just want to expand upon a little bit is when Palantir or really any enterprise business starts working with somebody is you’re not going to sell that $500,000 or million.
[00:04:30.060] – Sean
Dollar contract right away. What you do is like a try.
[00:04:32.590] – Sean
Before you buy situation. You run like a pilot. That means, like in Palantir’s case, you work with a client in your first year contract might be like $100,000 or less. And the idea there is to get that customer warmed up to your platform.
[00:04:48.750] – Sean
And just aware of what it can.
[00:04:50.720] – Sean
Do, like the full power, full potential. And that’s when your two comes around, is when you start selling. Now, the problem is in that first year you have really high expenses with their sales.
[00:05:03.280] – Sean
And this is one reason why the EPS was a mess.
[00:05:06.190] – Sean
As they’re hiring a lot of sales.
[00:05:07.490] – Sean
People, there’s a lot of labor.
[00:05:09.590] – Sean
Sales people are typically pretty expensive.
[00:05:11.830] – Sean
You have their base salary, and then there’s usually Commission or bonus on top of that, rightfully so. In this case, there’s a lot of upfront and expense and you start making those profits on customers near two and after.
[00:05:26.400] – Sean
So it’s a little slower.
[00:05:27.580] – Sean
But after you get a few customers.
[00:05:29.950] – Sean
The momentum really increases from there. I’ve seen this with other enterprise platforms like AWS. Microsoft Azure, Adobe has the Am tool. I’ve worked in software engineering for about.
[00:05:44.820] – Sean
15 years, and I’ve done a lot.
[00:05:46.460] – Sean
Of work on the enterprise side implementing these large projects. And yes, it’s not as lucrative that first year, but I’ve seen contracts that we’re talking multi million dollar contracts per year after that first year, and that’s a big deal.
[00:06:03.740] – Sean
So it’s a patient process in the.
[00:06:05.740] – Sean
Enterprise world, but when the momentum really.
[00:06:09.190] – Sean
Gets going, it’s well worth it. This is one reason why I have.
[00:06:12.600] – Sean
Multiple enterprise software platforms in my portfolio for Dnet. Cybersecurity is one I like Palantir, I’ve got Velocity, which is HR, payroll, all that kind of stuff.
[00:06:24.310] – Sean
Of course, Microsoft is in there, which has Azure as well.
[00:06:26.780] – Sean
But anyway, back to Palantir.
[00:06:29.170] – Sean
So let’s talk about a few points that I really agree with, which is.
[00:06:34.580] – Sean
In the earnings report. Alex talked about profiting off world conflicts like Russia and Ukraine.
[00:06:40.780] – Sean
I don’t think that’s anything to boast.
[00:06:43.560] – Sean
About or really even talk about. Like if there are conflicts in the world, don’t mention that you can make a profit on it. I don’t think that’s worthy of even mentioning. You should be placing your focus on the commercial side. How can you help businesses run more efficiently?
[00:07:02.040] – Sean
And that’s essentially what Palantir does.
[00:07:04.400] – Sean
It’s data analytics. They use the data and businesses. And believe me, working in big business for many years, there’s a lot of wasted time, wasted meetings, wasted emails, and a lot of inefficiencies with marketing, sales and operations. Where talent here can help is automate things, remove steps in the process. In my opinion, this is a big.
[00:07:26.230] – Sean
Deal for the future.
[00:07:27.410] – Sean
They’re a big necessity.
[00:07:28.440] – Sean
But to talk about like, yeah, if.
[00:07:29.740] – Sean
There’S a conflict, we’re going to make money and then make you money. We don’t want to hear it.
[00:07:34.220] – Sean
So Sasha, I agree with you.
[00:07:36.140] – Sean
I thought Alex Carbs comments in the earnings report, that was poor taste. I still respect what Alex has done. I respect what his leadership team has done.
[00:07:46.400] – Sean
But I do not want to hear.
[00:07:47.830] – Sean
Anything about world conflicts, tensions in the world, and how we as shareholders are going to make money on that.
[00:07:55.280] – Sean
That does not motivate me to be a shareholder. I’ll be honest and I know there’s a lot of people that agree with that.
[00:08:02.670] – Sean
Another thing that I thought was in.
[00:08:04.120] – Sean
Poor taste was Alex saying how good they were.
[00:08:07.580] – Sean
And he said it many times like.
[00:08:09.010] – Sean
We were very good at this, we’re.
[00:08:10.410] – Sean
Very good at that. That’s the last thing I would be doing, especially if my share price was at an all time high of 35 and now it’s less than $10. My responsibility as CEO, if I run that earnings call, would be to explain why this is happening and what I’m.
[00:08:27.250] – Sean
Doing about it and what my team.
[00:08:29.840] – Sean
Is really doing about it to improve. We won’t be talking about those world conflicts, but we would own what’s going on and try to give some peace of mind on the exact actions we’re taking. Like, what are you doing with the enterprise side?
[00:08:44.250] – Sean
This is what I’d also like to.
[00:08:45.760] – Sean
Hear is how are you going to serve the small and mid sized business market, those SMBs? Because that’s a huge market too. Maybe you can come up with like a light version of your enterprise platform.
[00:08:57.090] – Sean
That can serve that market.
[00:08:58.210] – Sean
That’s a little lower touch.
[00:08:59.560] – Sean
Maybe takes less time to onboard a.
[00:09:01.480] – Sean
Customer instead of like 6912 months or longer.
[00:09:05.220] – Sean
Maybe it’s like 30 days, 60 days, something like that.
[00:09:09.190] – Sean
Maybe a lower price point. So I would be looking at things like that. I look at the latest Netflix earnings call they talked about, yeah, they had a miss, but what are they doing about it? They went from one revenue stream to four. That’s what shareholders want to see. That’s the positive action. We want to see Palantir.
[00:09:29.230] – Sean
We didn’t really hear that.
[00:09:30.320] – Sean
They kept talking about how good they.
[00:09:31.760] – Sean
Were and that again was poor taste.
[00:09:35.370] – Sean
So let’s dive into the forest here and then I’ll talk about what I’m.
[00:09:38.190] – Sean
Doing with talent here. So with the first and let’s just take a look here at my screen real quick. Within Tykr, you can see this stock is still on sale.
[00:09:47.990] – Sean
Now for a stock that’s a little.
[00:09:49.390] – Sean
Less than two years in the public.
[00:09:50.870] – Sean
Market, more like a year and a.
[00:09:52.790] – Sean
Half, this is pretty good. Most stocks that IPO go public, they’re looking to raise funds, which means their financials are pretty weak. They’re usually going to be overpriced. So talented already is off to a good start.
[00:10:06.750] – Sean
They’re on sale a score of twelve out of 20 right now with our scoring system, which is pretty good, you.
[00:10:12.700] – Sean
Want to be north of ten. So twelve out of 20 is still good. And then margin of safety is 80%.
[00:10:18.090] – Sean
Right now.
[00:10:18.700] – Sean
I think in Tykr it’s saying seven point $55. And the sTykr price is $37, which means that’s intrinsic value, the fair value where it should be today, which I very much agree with. So the financials are looking pretty good.
[00:10:32.280] – Sean
But let’s dive into the meaning of the business. This is where I spend a lot.
[00:10:35.720] – Sean
Of time and this is what motivated.
[00:10:37.550] – Sean
Me from the beginning.
[00:10:38.400] – Sean
So this goes back to my comments on data analytics. So data is a big deal. More businesses need data to just be smarter, to get ahead of competition, to run more efficient. And this is where companies like Palantir can really thrive. They’re also enterprise software, which of course.
[00:10:57.980] – Sean
I made some great comments earlier is this is really sticky.
[00:11:01.420] – Sean
People are not trying something out for.
[00:11:03.440] – Sean
Like a week or two.
[00:11:04.610] – Sean
They’re committing to multi year contracts that.
[00:11:06.680] – Sean
Can be hundreds of thousands of dollars.
[00:11:08.220] – Sean
And up to millions of dollars per.
[00:11:09.620] – Sean
Year for just one customer.
[00:11:11.430] – Sean
I love enterprise SaaS.
[00:11:13.410] – Sean
It’s a great place to be.
[00:11:14.530] – Sean
Like I mentioned, I’ve got a few.
[00:11:16.720] – Sean
Enterprise SaaS businesses in my portfolio.
[00:11:18.600] – Sean
So that really motivated me.
[00:11:20.460] – Sean
So the meeting really checks out. To go back, the margin of safety really checks out.
[00:11:25.100] – Sean
So we got those two boxes checked with the competition.
[00:11:28.630] – Sean
We just want to take a quick look here.
[00:11:32.850] – Sean
I’m going to list a few of these. You’ve got Alterix, Snowflake, Data Dog. Splunk is another one. And looking at Alteris and Snowflake and Data Dog, these are all good businesses, and I feel they can all thrive in this market. It’s kind of like I have a few fintech stocks in my portfolio, like PayPal and Square. They can all thrive. There’s plenty of business for everybody. And I think the same for these businesses.
[00:11:59.170] – Sean
The thing that for the business that has done a really good job, I have to say, is that a dog they do serve.
[00:12:06.340] – Sean
They have enterprise customers, and that small and mid sized business market. And that’s a great place to be.
[00:12:13.500] – Sean
When you have a platform that can serve. Like, let’s say you’ve got a company.
[00:12:17.860] – Sean
With several different platforms within under its umbrella. That’s a really healthy business model. You can serve a lot more customers. There’s a lot more room to grow. So with Palantir, they’re only serving really that enterprise market.
[00:12:32.220] – Sean
Of course, there’s government market.
[00:12:34.280] – Sean
I’d really like to see as that.
[00:12:35.950] – Sean
Business matures, they introduce some kind of SMB focused product. I think that would be a great.
[00:12:42.020] – Sean
Way to get people using the tool.
[00:12:44.480] – Sean
Using its power, and then maybe upselling them to something that’s a little higher end.
[00:12:49.400] – Sean
So that’s what I would do, at least.
[00:12:51.810] – Sean
I want to also address this.
[00:12:53.770] – Sean
There’s this debate whether talent here is.
[00:12:56.600] – Sean
A consulting company or a software company.
[00:12:59.780] – Sean
So let’s just set the record straight.
[00:13:01.950] – Sean
Consulting companies don’t have a Bolt on product. They’re really selling to generate revenue within the business model.
[00:13:09.540] – Sean
For example, I’ve done a lot of.
[00:13:10.780] – Sean
Work with Accenture and Deloitte are two.
[00:13:13.010] – Sean
Really solid management consulting companies.
[00:13:17.250] – Sean
They’re straight up consulting, though.
[00:13:18.920] – Sean
They’re not providing a service and a software product. So you’re making money on both. With Palantir, they have what’s called. And you see this within enterprise software, they call Pro Serve professional service, and it’s the onboarding, it’s all the work upfront. And then there’s the ongoing support that.
[00:13:38.480] – Sean
You have with that tool.
[00:13:39.700] – Sean
It’s just a Bolt on service to the software. And that’s important because when you start working with these salespeople that are the.
[00:13:50.260] – Sean
Salespeople of like a large enterprise platform.
[00:13:54.630] – Sean
The best in class, they’re just real people. They’re down to Earth. They’re nice. They want to come in, they want to provide awesome customer service, and they take you out to dinner, go out for golf, whatever, and the best in class, they just do that like they treat people with respect. They’re not corporate. They’re really there along the way.
[00:14:17.780] – Sean
And when you have people like that.
[00:14:19.910] – Sean
Serving that customer, that large entity, the stickiness increases even more.
[00:14:25.390] – Sean
In other words, if you were to.
[00:14:26.590] – Sean
Take that salesperson out of the equation and only use the software, sure, it can be a great product, but the stickiness isn’t quite there. So Palantir is doing a really good job of building those relationships.
[00:14:39.450] – Sean
They get those sales people engaged.
[00:14:40.830] – Sean
They probably got a whole team interwoven with the customer there, and they’re taking care of them. They’re there to ask questions, improve the tool, just make it better over time. And that’s a big win that creates that stickiness, that scalability that we’re starting to see with Palantir. So we know that whoever is their CRO of their chief revenue officer is really leading a really solid team. So with the moat, in this case, I do check. The box at the moat checks out as well.
[00:15:12.700] – Sean
I think, yes, there’s a few competitors.
[00:15:14.470] – Sean
In this space, but Palantir is doing a pretty good job.
[00:15:17.460] – Sean
I think they have a sophisticated product.
[00:15:19.700] – Sean
And I think they have a lot.
[00:15:20.680] – Sean
Of opportunity to grow in this market.
[00:15:22.820] – Sean
So that box checks.
[00:15:25.440] – Sean
The last M in the equation of.
[00:15:27.880] – Sean
The four M is management. So Alex carpet, as I mentioned, is the CEO.
[00:15:33.110] – Sean
I think he’s done a great job.
[00:15:34.480] – Sean
Since the company really started in 2003. Peter Thiel is a co founder.
[00:15:40.030] – Sean
If you don’t know him, he was.
[00:15:41.580] – Sean
The first investor in Facebook.
[00:15:43.430] – Sean
He also has a venture capital firm.
[00:15:45.360] – Sean
That has invested in a lot of other businesses. I think Tesla is on that list.
[00:15:50.110] – Sean
And then his early days, he started PayPal.
[00:15:54.590] – Sean
So him and Elon Musk were involved.
[00:15:57.060] – Sean
In that organization in the late 90s, early 2000s.
[00:16:01.450] – Sean
So he has a really nice winning track record. He’s invested in a lot of businesses.
[00:16:06.190] – Sean
That have done very well.
[00:16:07.790] – Sean
And that’s another thing that motivated me to really turn my attention to Palantir.
[00:16:12.250] – Sean
In the beginning is, hey, you’ve got a solid management team here.
[00:16:16.440] – Sean
You get the right people leading the organization.
[00:16:19.070] – Sean
Of course, Peter Thiel is not involved with day to day operations, but he’s on the board and he’s heavily influential.
[00:16:25.860] – Sean
So with this, I do say all.
[00:16:28.450] – Sean
Four Ms check out, but here’s what I’m doing. I’ve been heavily investing in the stock.
[00:16:35.320] – Sean
Through 2021, and what I’m doing now.
[00:16:39.610] – Sean
Is I’m still investing a little, but.
[00:16:42.200] – Sean
I have a focus portfolio of about.
[00:16:44.000] – Sean
Ten stocks, and I need to turn my attention to some of the other stocks because they’re all pretty much beaten down. They’re all tech stocks. So I’m slowing down Palantir, and I’m.
[00:16:55.120] – Sean
Starting to go into, like, I’ve got.
[00:16:56.860] – Sean
Microsoft long term hold there. Google, you got PayPal, Apple, AMD.
[00:17:02.820] – Sean
There’s a few others as well.
[00:17:03.960] – Sean
Fortinet Pelosi.
[00:17:06.570] – Sean
So I’m starting to kind of diversify my investments.
[00:17:09.580] – Sean
There still long term holder of talent here. But I think, Alex, if I were.
[00:17:15.040] – Sean
You, I kind of pull back on.
[00:17:16.240] – Sean
The comments around benefiting or profiting from.
[00:17:21.080] – Sean
The conflicts in the world.
[00:17:22.150] – Sean
And let’s really focus on the commercial side, both enterprise. And let’s see what you got. If there’s anything out there SMB related, that would be really awesome to see you guys jump into that market. All right.
[00:17:33.530] – Sean
Hopefully, this video helps. We’ll talk soon.