00:00Let's talk about the outlook. Annual revenue seen between $7.18 billion and $7.2 billion. The estimate going in had been for $6.27 billion. So quite a beat there when it comes to the expectations. Brent, you can see that reflected in the shares. What do you make of what we learned at the top of the hour?
00:19There's still a crush in the numbers. And I think in a world of AI that is getting crushed in software, my coverage universe is going straight south.
00:30The Palantir's fundamentals are doing extremely well. Cash flow growth, well above forecasts. The commercial business is doing very well. Obviously, if you look at the government business, you can see what's going on in our world and the place they're going to be.
00:46So I think fundamentals are screening high. You obviously have to pay a price, which is it's the single most expensive stock by a factor of two. So, you know, if we were in a better tape, stock could be up a lot more.
01:02You know, we're dealing with a stock that's still 45 times revenue and it's still one of the most expensive names. And we've had a whole group that's under massive duress because of what is AI going to do.
01:13So they're fundamentally a great spot. Obviously, valuation is why the stock is sold off from over $200 to mid-150s is because everyone's checking the valuation and realizing it doesn't really make a lot of sense.
01:28Well, valuation being one thing, let's talk a little bit more about fundamentals because we know that Palantir makes the lion's share of its revenue from its government contracts.
01:36We know that there has been a push to maybe diversify that out to commercial contracts as well. What are you seeing there in terms of progress?
01:45Yeah, I mean, the commercial business, they're guiding growth of over 115 percent. So, I mean, there are not too many companies putting up those numbers, right? We talk about a 10 to 15 percent growth rate for a lot of the large cap names and they're pushing 115.
02:01So, you know, it's not even really comparable. And I think this goes back to every boardroom globally is thinking about AI. They're thinking about how do I implement this, whether I'm healthcare or I'm a retail company.
02:18Whatever your business you're in, you're thinking about this first and foremost in the boardroom. And they've done a great job. You have companies, commercial companies now highlighting them on earnings calls, saying that the product is taking costs out of the supply chain.
02:33They're putting people into hospitals faster and getting the right healthcare. So, I mean, they're solving problems, as they say, that no one else can solve.
02:41And I think they really solve the puzzle, which was it was the Tesla problem at the beginning. You know, the car can only shut around doctors, lawyers and people that have 30 years of experience because they're they're so expensive.
02:54And what they figured out is how to bring the software more to the mass market, to more commercial companies. And they they have done a really good job of solving this.
03:05And so putting up 115 percent growth is pretty incredible. And I think it shows they've overcome the problem, which was, you know, we're for a very few select people.
03:18They're now showing with these numbers that they can address a bigger portion of the commercial market, which is which is exceptional.
03:28And I'd say that the companies that we talked to in our industry that love data are all acknowledging how well Palantir is doing.
03:37And so if you talk to Oracle, you talk to many others, even Mark Benioff is talking about, you know, the model of four deployed engineers.
03:47That tells you a lot about, you know, the fundamentals and how they run and the success they're having.
03:54And so I think that's when you're when others in the industry are trying to emulate you, you know, you're doing something right.
04:01When you put up 115 percent commercial growth. Yeah. You're you're doing you're doing something right.
04:05Yeah. No doubt about it. I am curious, though, Brent, though, if you think this is a company that can actually grow into that valuation a little bit.
04:11I mean, we know on the government side, obviously, the ties to the current administration have helped a lot.
04:16It's good and encouraging to see them expanding a little bit more on the commercial side.
04:20But again, I mean, I mean, I know for a lot of investors, fundamentals don't seem to matter anymore.
04:24But when I look at these multiples, I just think, when did they grow into that?
04:29Yeah, I mean, that's that's the pushback. I mean, again, I think we try to rate it in two different parts of our rating.
04:35It's a it's a buy fundamentally. It's a strong sell.
04:39If you had a strong sell on the on the multiple, because if you look at the next tier down, you have companies like Crowdstrike and some really good companies that are trading, you know, sub 20 times revenue.
04:50And this is still 45 times revenue. And so, you know, at two hundred dollars plus, we were just like, this doesn't make any sense on a valuation basis.
05:00And so, you know, you kind of have to basically say, you know, what's the available time? Can they grow into that? Can they sustain these rates?
05:09Can they sustain the cash flow? And what they're proving is they can do a lot of these things.
05:13It's just that's going to take forever for the multiple to come in. And so we saw this with Snowflake.
05:19We saw this with many other names we cover. It can just take a long time to grow in.
05:24And so what we've said is, like, you can buy Meta at mid 20 times earnings, but you've got to pay 50 times revenue for Palantir.
05:34And I'd much rather buy Meta, you know, like Meta stocks up and Palantir stock is down for the year.
05:40So I think our tradeoff is like everything has a price. And we look at both fundamentals and valuation.
05:47Evaluation has just been impossible for many of the long onlys that we cover on the institutional community to stomach.
05:56And the good news is we're seeing the software sell off. We're seeing the multiple.
06:00We've seen the stock trade off from over $200 to mid 150s, and it probably finds some support.
06:06But the problem that they have going now is the multiple is just, again, we're in a multiple freefall in my entire coverage universe.
06:14And so the question is, are they in the AI winner or loser?
06:19I think many believe they're in the AI winner. They get a multiple in premium.
06:23The question is, what's the premium going to be? Great, great company.
06:26Again, I just can't say, you know, nice enough things about the fundamentals.
06:31It's just the valuation also matters.
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