Palantir's Last Great Wealth Opportunity

Is this your last chance to sell your Palanteer shares or is now a time to be adding more? Joining us today is one of the original Palunteer bulls, Tom Nash. Tom, so great to have you on the show today. Thanks for doing this. >> Thank you for having me on. >> Well, we have plenty to talk about with Palunteer today. Let's just get the conversation started with this blowout earnings report. One of the best quarters Palanteer has maybe ever had and yet the stock price continues to go down. What's going on here? So looking at the cyclicality of the stock market or the cyclicality of this particular stock we're discussing here, it tends not to go up in a straight line non-stop >> markets and stocks tend to have lots and lots of different opportunities. So is this the last chance we'll get Palanteer at 130? Maybe and maybe not. Maybe we'll get it at 70 or maybe we get it at 30 or maybe it goes straight from here to 500. The key isn't to try and uh predict that. I think the key is to have a plan that works no matter what scenario plays out and to be prepped for volatility and to be prepped for further opportunities down the road, whether it's financially or emotionally or psychologically. I think the key is to prepare, not so much to predict. >> I think that's solid advice to not get too emotionally involved in this. And I I see emotions rising when I I hear from Palunteer investors because you have this great earnings report. You have the the great headline. I mean, this is the best earnings report they've had, maybe ever, and yet the stock price is not reacting the way investors think it should. So, maybe talk about some reasons why. What did you see in that report that maybe has you excited as a Palunteer investor? >> You know, I I I think this might be the best quarter Palunteer delivered to date, at least that I can recall, and I've been on this since they went public. So as a public company, I don't think I've seen a better quarter from Palanteer and it might be one of the best quarters of a company we've seen in recent times because there's no weakness in this in this quarterly. Whether you no matter how you slice and dice it, whether you look at the projections, whether you look at the performance, the margins, net dollar retention, we can go in any direction and it's going to shine. That being said, with the report being great, you know, the markets are really, really good at pricing in fundamentals in the long term, but in the short term, the markets are notoriously bad at doing that. There's a lot of mispriced businesses in the stock market. I don't think Palanteer is the only one. Just to give you an example of a big name that nobody's talking about, even though it's obvious, Amazon is insanely underpriced, misunderstood, and super lagging behind even the S&P 500, even though it's blowing out the earnings as well. I think in the short term, there's a lot of mispriced opportunities. The market sucks at short-term pricing because uh not me, I'm going to plagiarize Mr. Benjamin Graham here, the famous quote, "In the short term, the market is a voting machine, but in the long term, the market is a weighing machine." If you ask me if I was surprised that the numbers were great in this stock drop, no, I wasn't surprised because I've seen when it plays out the other way. A couple years ago, I don't know if you recall, Tesla was heading into earnings and everybody was expecting the earnings to be absolute doodoo and then they had doodoo earnings, but because everybody expected it, the stock spiked the next day, right? So, I there's a lot of different like that's why I never touch stocks around earnings because it's such a gamble. I think with in the case of Ponteer, you can ask me why I think it happened. We can have that discussion if you'd like. Why I think it happened? I think it's priced for perfection and when it delivers perfection, it's already priced in and people like to trim and take profits and, you know, taste the money and mitigate risk, which is all valid strategies that I fully support. And, you know, profit taking is okay. And yes, the stock is priced in I think at a very high execution level. you know, for Palanteer to fly up, you needed probably to see like 150% revenue growth. >> Yeah. The market's just never satisfied no matter what happens, even when it does have the stellar earnings like this. I want to break down a few things of why those earnings were so good. Why this was one of those standout quarters that we've seen for Palanteer. And one of them that we're seeing in headlines right now is the Iran war and the impact that that has on Palunteer. I mean, we all know it's impacting our personal finances. You can feel it every time you have to fill up your gas tank. 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And again, make sure to use promo code marketbeat to get an extra 25 cents back for every gallon on your first tank of gas. All right, Tom, back to our Palunteer conversation. Do you think that the Iran conflict really had any kind of direct correlation to why earnings were so strong for Palunteer this quarter? >> No, I don't think that quarter in particular is reflecting the Iran war impact on on Palunteer. Let's divide this into two separate brackets, right? On the one hand, what does the shift in the global chess board means for Palanteer? That's one question which is huge. On the other hand, how important is government in Palunteer's business, which is something that I've changed my mind on? So, obviously, we look at earnings. So, we we look at everything that happened mainly ahead of the Iran conflict playing out. And I think we'll see the impact of this of this rearranged global chessboard on Palunteers earnings and numbers years into the future. But that's not the main point. I started off as a palunteer bull almost ignoring the government business. If you go back to my earlier videos, I almost I literally I think said I don't care about the government business at all. I'm I'm there for I'm there for the corporate business. This is where the money is. Right? As things progressed, what dawned upon me and I heard some smart people talk about it. So I'm not going to say I just literally had a Eureka moment, but I heard people explain this that I that I really value in the Palader community. I was like, wait a minute. And then I realized, hey, the entire world is essentially going into this AI metamorphosis. And all these governments who are lagging behind are now in this massive AI arms race. Who has the biggest check? Well, that's the United States government, right? Who's going to spend the most on government/military style AI project? Well, that's the US government, the Department of Defense, etc. Who is their favorite go-to supplier when it comes to these matters? Well, that's almost exclusively Palanteer, right? Oh my goodness. And I think a couple years ago we we I I just I I remember speaking to my wife and I said like I think Palanteer is actually going to be even bigger than I thought because I think the government business might be just as big as the commercial opportunity. So that happened even before the Iran stuff started. Now supply chains are evaporated. Any certain certainty in global uh commerce and globalization is falling apart. Alliances are essentially breaking. cha chaotic world versus somewhat of an organized globalized existence before this started playing out is a huge huge opportunity for Palanteer because if you think about what Palanteer does and what it does for for for its partners it's number one provides certainty in an uncertain world and number two close these gaps of information uh or instability or supply chains essentially try to create efficiency where it's very very hard to do so if you go back to Palunteer's origin story. If you if you recall, I don't know if you had a chance to to read, but they've published a paper where they talk about the project they did with Airbus that originated in 2017 where Foundry was essentially born. It was born as a project of chaos. Essentially, Airbus was struggling. They were way behind the A350. They were essentially on the verge of lawsuits. And they came to Paner and said, "Look guys, we need to we have like 17 different factories and five different countries in two continents and million suppliers. We're we're way behind, etc., etc. Can you make sense of this chaos so we can increase production?" And what ended up happening is that the production was increased not to the original standard, but it was increased by 20% and the quality went up. Right? So Palanteer is an expert at taking chaos and turning it into money which I think is the hottest commodity right now in the world. >> Yeah. And I think AI has absolutely helped that part of Palunteer's business. So there's been this argument of Palunteer is going to be taken over because of AI. It's a software that is no longer needed. Palunteer is going to be eaten up by this this software downturn, right? But I think much like you just described, Palanteer makes sense of chaos and AI has just helped that >> tenfold. It's helped them be better at that. So that makes a lot of sense. Let's dive into that conversation a little bit more about do we think that these AI models, everything that's advancing in AI is going to negatively or positively impact Palunteer's long-term story. >> I think it's a wonderful question and the way you ask it is the right way to look at it. Me known to be the face of this Palunteer retail community, I get that question the supermarket. I get that question the gas station. I get that question when I'm in the go heading into any store. So I answer this question almost in a daily and the way you asked I think is the best way to look at this. Let's look at the changing landscape of enterprise software right enterprise software is changing because things that were done by behemoth companies are now easily scalable through AI solutions. Right? So you have a lot of companies for example you have a company that provides uh all sorts of skilled services for design and edit fiverr that's going down you have monday.com I think is coming down salesforce coming down so all these companies in in the software as a service business are getting hit because the expectation is that these jobs are going to be eaten up by AI that makes a lot of sense and for a lot of these businesses makes a lot of sense okay but that's the same misunderstanding we had when I say we the world had back in those days where people were telling me Tom you don't understand Palunteer doesn't generate AI it's not an AI generative company why would you give this this crazy valuation I said precisely for that reason because AI generative businesses are commoditized and by the time you'll see it I'll be much richer the money is not in the models not in the generation of AI the money is in cleaning all of this up >> yes not just AI, but actually making AI useful. And I think that's where the real value comes in this whole AI story is who is going to be the first not just to give us all of this data, but to actually make it useful. And we're seeing that show up with a number of companies right now. We actually just talked about the specific topic on Market Beat in a new article. It's a list of five different companies in the AI inference story. These are the companies that have actually figured out how to make all of this AI data useful and actionable for businesses. If you want to read that list of companies and and dive more into that AI imperence story, scan the QR code or click the link in the description to get that free article right now on marketbeat.com. And Tom, I really think that this is at the heart of Palunteer success. Palunteer is so good at making all of this chaotic information from AI actually useful and actionable for companies. The main goal right now of every CEO in the world that is starting to implement AI in their business is not to find a great model to do it because there's so much tools out there. The main concern of of CEOs right now is how do we find a tool that gets the job done but at a reasonable cost? How can we scale AI to improve our business so we can make more money? Because I can easily Frankenstein a solution that works for you, but it's not going to be scalable. It's not going to be financially viable. You're going to be paying so much money. But then the push back is, well, Tom, look at the average customer spend of the top 20 clients of Palunteer north of $60 million. I said, do you think they're paying them because they are volunteering to pay those 60 million or maybe because they're making 120 or 130 on that 60 million, right? I don't think unless they're irrational players and they're just contributing money to Palunteers's balance sheet. I think it's pretty obvious that Palanteer is really good scaling. And you quoted me on this. I said, "Think about it like, you know, painting um let's say you want to paint a house, right? You can take a toothbrush and dip it in your paint bucket and do it and I don't know, God knows how long it's going to take you, right? It's possible." Or you can hire a company, they'll come in and they'll do it in 3 days and they'll be gone. That's going to be cheaper, quicker, and more efficient. Yeah, I think that's the best analogy I've heard for describing why Palanteer is still going to be valuable even if a company can theoretically go create on a large language model and make this kind of uh software system for their company. Yeah, it's possible, but it is like painting with a toothbrush instead of actually doing it the efficient way. And I think that that shows up in the balance sheet. So again, fantastic uh analogy for what this this conversation on palanteer. >> I have no doubt that the labs are going for Palanteer's neck. Why wouldn't they? there's so much money in it, right? But I just want to remind them that Microsoft made this attempt already with Fabric and you can Google how fabric ended up. So, uh the fact that they'll try to take the lunch, uh I would really be very very cautious. I don't think Palunteer is slack if you know what I mean. So, it's not going to be very easy to go for for the juggler of Palunteer because it's a it's a whole different animal. So, Microsoft tried this and they essentially pulled the plug in the saying, well, let's just join them instead of trying to beat them. That's too hard. Well, I think that that that's what I was getting at is it it shows up on their balance sheet. You look at again the most impressive quarter that Palanteer has had. You can see the number of clients that they have. You can see the money coming in. The money that these companies are spending on Palunteer, clearly there's a value ad for what Palunteer offers. Do you see that changing any time in the next year to 3 years or 5 years? >> When people tell me a a a narrative, right? So, the narrative is Palunteer is getting eaten up by a tropic narrative. Okay. I always say fine let's look at the numbers because the numbers never lie right and I say well why don't we look at a few parameters if I'm losing business to a competitor what I'd expect to see a slowing revenue growth at minimum a compression in my margins because I have to sell cheaper right and I would expect to see more debt because I'm borrowing more money to try and survive right none of these things exist in the case of Palanteer so their revenue growth is at 70% which is the highest they've ever had So it's increasing right if you look at the margins that even more glaring right so operating margin of Palanteer is now almost at 40% operating margin which is the highest they've ever had in history right and their debt is actually down I think from 260 million just a couple years ago now to 212 it's it's been 450 when I started investing and at the same time cash went from 1.2 to 1.6 six and then you have another five or six million that they have in short-term securities. So if you bundle short-term securities in cash, 8 billion in cash and short-term securities versus 200 of debt. So they're not borrowing money. The margins are expanding and the revenue acceleration is accelerating. It's going to be a very hard argument to make that they're actually losing ground to a competitor given these numbers. >> Yeah, the numbers are absolutely there. They are solid and yet the market is having this completely opposite reaction. Like you said, not a surprise. This is a thing that happens. But I think I want to talk to the retail investors out there who are holding Palunteer or maybe have thought about I didn't I missed out on the the early entry into Palunteer. I'm just getting into investing is now a time to add Palanteer. So let's talk about what to actually do with this stock right now this week as you're watching this video. If you're an early investor in Palunteer, I'm curious for you yourself, have you taken profits along the way? Are there times when you have cashed in a little bit or cashed in and then rebought your shares when they're at this lower price? or are you just a long-term buy and hold investor? What do you recommend? Especially when it comes to Palunteer. >> So, I'm a pure buy and hold investor. I only sell um if the thesis breaks. Uh so, as long as the thesis is intact, uh I don't sell. Right. That's a very aggressive stance. I think for most investors, the right approach would be some sort of a hybrid between that and what you suggested. What I always say to my students is I say the best rule I think to do this is set yourself a rule ahead of time. Not when you're already emotional, not already when you are looking at a lot of money and you have greed involved. Set yourself a rule, a hard rule which you have no consideration. And I would say 50% of unrealized profit, trim 10%. 100% of unrealized profit, you trim 20%. 150% of Andrea's profit, you trim 30%. That way, you essentially take emotions out of the game completely because you already preset these rules. And number two, what happens is that you win no matter what happens. So, let's say for the sake of our example, right, somebody was up 100% on Palunteer, right? And then they trim 20%. If the market still flies up, well, they still got 80% of their investment playing and enjoying the upside. If the market takes a dive, they took 20% of the entire position just before the market dove. Right? So whether it dives or flies up, you will be fine. That's the best hybrid approach in my opinion. Based on uh what you said in the beginning for people who have not invested in Palanteer, looking at Palanteer now, the worst thing you can do as an investor is look at the price action ahead of the decision to buy a company. So I'm not a trader, right? A trader should look at what's the price is doing, etc., etc. As a long-term buy and hold investor, sometimes I would hear, well, the stock is just did parabolic spike. Who cares? That's not the point. The point is what is the intrinsic value that you think the company has? What is the current value that the company is trading at? If there's a gap, you should buy it. In the case of Palunteer, yeah, sure, the best time to plant a tree was in 2020. Sure, when it was $10, right? But it's still a great company. It still has a lot of upside. So, the next best time to plant a tree is today. The only thing I say is just be slow and methodic. What people tend to do in these situation Bridget is like they try to catch up to this imaginary like oh my all all my friends are like already have hundreds of dollars hundreds of thousands of dollars or millions of dollars and they try to catch up and they go super quick and fast and usually when you do that you meet a downturn or a selloff for a few weeks and then you get even more confused. The way I do it is like I would say start super slow but do it in a weekly amount that you can sustain for a long period of time and just increase your position over time and try not to compete with anybody. I think just just compete with yourself. >> I think this is all really solid advice for investors especially that taking the emotions out of it and just making it a standard thing so that you're not paying attention to every headline and every new drop and new spike that the stock might have. That's great advice. I have another question on what you said of what your again I agree it's it's a pretty strict standard to only drop a stock or only sell a stock when you think the thesis has cracked and so for Palanteer in particular what would that look like for you what would be your the thesis is correct it's time for me to get out what would that look like >> well a few things can happen so I think Palanteer has most likely the biggest or first or second biggest keyman risk of every of every stock I've ever looked at so Palanteer and Tesla which are not accidentally my my two positions of individual stocks. So they have the biggest keyman risk in in in the market which means that if Elen leaves, if Alex Garp leaves, uh I don't think the company is investable in my mind. So I think there's such an such a vital part of my thesis. I wouldn't want to be probably an investor with a professional CEO that's not Karp or or Elen, right? So that's number one. I think they have a lot of key man risk. Number two, obviously, you know, disruption. Maybe, you know, maybe I'm wrong about my anthropic thesis and maybe anthropic comes in and cleans house. That would be obviously something that I'll have to think about. Loss of government business could be one where they lose contracts or the labs I basically going in the tropics where trying to compete, etc., etc. But I judge this not based on what my hunch or gut feeling is. I always say this and I and I repeat it. The numbers will tell you everything you need to know. If if if it's getting disrupted, you'll see the margins compress. You see the revenue growth slow down. You'll see it ahead of time. It's like with the bad teeth. It doesn't happen overnight. There's a lot of signals in advance. So when just pay attention and don't wait for till the root canal. >> Perfect. Well, it's worked for you so far. Uh great advice and such a great conversation on Palunteer. Tom, thank you so much. If you are interested in another conversation on Palunteer, make sure to watch this video. I just talked to our Chris Marotch, who is also an early Palunteer bull. Here's what he had to say about Alex Karp in this