Palantir CEO Investing in NEW Military Tech [Buy THIS Stock?]

Alex Karp of Palunteer was apparently spotted in Israel today. And Alex Karp now expected to also be the first major investor into a new defense company formed by the Ukrainian defense minister who got the boot in July. And so what's going on here? And how could you potentially play this? And what does Kattos the stock Ktos kos have anything to do with all of this? Well, let's try to put all of this together. So, first, according to the Kiev, the independent uh the defense minister, the former defense minister of Ukraine is offering drone technology to the United States in exchange for Patriot missiles. In other words, Ukraine wants to be the manufacturing ground for drone technology that the United States can utilize in exchange for Patriot missiles. Now, there's been some talk uh about how companies like L3 Harris and Rathon do not want to license their technology to Ukraine for Ukraine to manufacture these American weapons cheaper because they're worried about IP theft. Of course, if you man manufacture all of this in the United States, it's going to be a lot slower than if you manufacture it overseas. So, some people are arguing that these legacy defense contractors are, you know, to the detriment of American lives trying to hold on to their intellectual property because it could just be manufactured cheaper in Ukraine. And so now Ukraine's like, fine, don't give us your IP. We'll just develop new technology ourselves. And so now you've got Federov, who is seeking US investments for a new defense technology fund and offering to help Washington develop drone capabilities in exchange for Patriot missile interceptors. So, we'll manufacture your drones. You give us patriots. This apparently in this uh Financial Times interview here where they're calling it not exactly a classic venture fund. Instead, we're writing this new history of war. And a lot of it's going to have to do with drones. Not only high-speed interceptors to counter Russia's new jetpowered attack drones. We'll talk about those in just a moment and what Karatto has to do with all of this. uh but also uh how to potentially manufacture better drones ourselves that we could use either, you know, in partnership with uh Ukraine or even just ourselves given that we might end up needing them uh to defend against Iranian attacks in the Middle East, especially over what's happened within the last 24 hours. He identified three initial priorities for the fund. battlefield robotics to reduce the reliance on manpower, cheap high-speed interceptors for drones, uh, and lowcost AI enabled missiles. That sounds a little little freakish. Uh, but anyway, he was the Ukraine's Russ, uh, Ukraine's youngest defense minister until he was sacked after just six months in office. And now he's going to lead this uh essentially venture capital fund to go hunt for uh funding. And it looks like Alex Karp is a biting hookline and sinker, first major new investor in the defense company that uh this defense minister is putting together, former defense minister is putting together. Uh Russia now also reportedly increasingly using jet powered drones which can travel up to 600 kilometers per hour, more than three times as fast as a piston drone. Uh this is uh definitely something to pay attention to given that if we end up having drones that previously were the uh Shahid, it's pronounced apparently uh drones that travel about 130 mph, these drones are expected to go somewhere around 300 mph. So you have this massive boost in speed. Still nowhere near as fast as a uh jet powered ballistic missile which could you know fly in the range of 7 to 10 times mock uh which you know we're talking thousands of miles per hour. That being different from these but these drones you know missiles obviously going much faster aerodynamically or otherwise. these drones traveling three times as fast as a usual propeller powered drone creating problems in Ukraine because Ukraine is now having issues actually intercepting these because they're so freaking fast. So in other words, the attack weaponry is developing faster than the defense mechan is. Uh so the defenses are going uh and that's where Ktos actually comes into play. And so we're going to do a fundamental analysis on KTOS to see exactly what they're developing and how this applies to exactly this race that's going on. But first, I want you to see some of these jet power drones, some of this footage here by uh Radio Free Europe, take a look at this because in my opinion, when when you see these jet power drones compared to the slow ones that we've seen, those shahed, you know, we've all seen those videos on Twitter or whatever before. Take a look at how fast these puppies are. Crazy. >> These drones are commonly known in Ukraine as Shaheds. In Russia, they're called GetOn 2. But in recent weeks, this drone has taken a back seat, an upgraded version known as GetOn 4, now has a jet engine and the ability to be controlled online. It's crazy. >> This Ukrainian air defense crew operates Soviet made OSA surfaceto-air missile system. It is still protecting Ukrainian skies from enemy targets. So this is the the big issue here is this is an older school more traditional defense weaponry. This is where you're firing projectiles at these drones to take them down. They interview this person. They talk about how, you know, important they are to taking down these propeller drones, but how it's becoming harder to take down these jet powered drones. Uh, and that's actually where companies are now trying to come up with multiple different uh styles of intercepting uh this jet powered drone technology or really any kind of drone technology. Uh some of these options uh that are being developed uh include uh radio frequencies uh so trying to just jam these uh these drones which is sort of your more classic kind of intercept style. Uh but then you've also got the potential uh for um how how should we call it uh we've got this written down here. Let's go we'll say exactly what we wrote down the systems. Here they are. Yeah, I've got my little segment right here. You've got jamming, which is your radio frequency tool. You've also got highowered microwaves. So, a burst of microwave energy basically to take down an entire swarm in the form of a cone. I think of this as your area of effect kind of attack like in World of Warcraft, single target versus multi-target. So, in the form of a cone, Rathon currently produces the phaser system in this. So you've got radio frequency jamming, you've got microwave radiation, and then you've got directed energy, which would sort of be like a singleshot laser. And the idea here is that these defenses are much cheaper tools than sending a missile like what you're seeing where we just saw in that video, like firing a rocket after these drones. it's going to cost you $30,000 a rocket to $3 million per interceptor like a Patriot interceptor. Whereas with these directed energy shots, you're really using about$1 to10 dollars worth of electricity to fire these directed energy weapons. You can see here in the KTOS uh earnings call, Q4 is important because of this program. We got funding for it. The Department of Energy is looking for companies to help secure nuclear assets. They're developing a mobile and transportable system where Katos is the prime contractor responsible for the entire system working including the directed energy weapons where the goal is to intercept these drones at a low low cost and these technologies are just now ramping and ramping into 2027. So if we go back here for a moment and just jump forward take a listen to this just for a moment. >> Interception. It is publicly known that the Russian military is currently using several versions of jet powered attack drones. The Geton 3, Gon 4, and GON 5. The first adaptation of Iran's Shahed 238 drone is a transitional model with a flight speed of around 300 km/h. Ukrainian drone defense units have shot down these drones repeatedly, but the later versions of the Geran are significantly faster than Ukrainian interceptors. >> Right. And that's the key problem right there is the speed. And the question is those drones are being manufactured in Russia by Iran. And so it wouldn't actually be hard for those jet powered drones to transit down the rivers through the Caspian Sea to Iran. And then Iran could use those against the United States in the straight of Hormuz. I've actually got sort of a a written comparison right here. uh the the Shahed 136 you're looking at, you know, about uh in the low 100s of miles per hour. These are kilometers per hour right here. Uh and then closer to about three times that for the jet powered Gan 4, which is also a Shahi drone. Uh although these are expected to use Chinese jet engines. So they put a small Chinese jet engine on it, which Katos thinks one of the biggest growth verticals they're going to have is jet engines. No, I just be transparent. I don't have any exposure to the defense contractors or CTO. So, I'm not trying to like shill the stock because like I'm investing in. We're just looking at this now and and studying this and we find this very interesting. So, uh interceptor drones uh cost about a,000 bucks uh over in in Ukraine and they could do a lot of damage with these thousand drones. So, your intercept costs have to really come down to well below the cost of manufacturing those drones to actually be competitive. need to be fast enough to take down these jet drones. Uh, and that's the problem. These GR fours are not really catchable drones. They're just too fast. Uh, so that creates an issue and that's where Kattos is like, we might be working on a potential solution. Now, of course, there are many military defense contractors for this. And Karp is obviously throwing his money into the military industrial complex on the startup side. A probably because he has access to these private companies. Uh and B because you know Palunteer keeps shilling how important they are and their AI system is to the war against Iran but also the war against Russia and Ukraine. Palante are taking both sides of that. Uh well you know the Ukrainian side and the US side. Uh and obviously the Israeli side. Uh, Kattos, speaking of Israelis, just acquired a company that was an Israeli company called Orbit Technologies Limited, and they are a satcom's for drones companies uh for UAVs, but also for missiles. They specifically say leading global provider of mission criti critical satellitebased communications for mobile and unmanned aerial, seaborn, undersea, and land systems as well as other systems. Other systems are probably like rockets. So, if we look at the earnings call for KTOS, there's some really interesting things that they talk about here. Let's close all these little sidebars out here as much as we can. Uh, we'll leave the bookmarks open. Uh, so this is the directed energy side, and they have a $150 million contract for counter uh unmanned aerial vehicles or systems called the as part of the solar shield program. Uh this is where we talked about the various different ways that you could defend against a drone. Keep in mind there's also the uh US-based sort of more police department based company called Axon that uses done technology. They bought a company called Done. But that's not really the subject of this video. So if I now just jump into some of the hints that Katos gives. Look at this. An analyst asks about unmanned systems and guidance on these unmanned drone systems. And the president and CEO says the following. We have to be very careful here because of the customer. So we can't get into too much detail on this because then it will give away what we're doing. Our hypersonics business, the engine business basically and the space business, those businesses are ripping. But on the uh on the drone side, we're going to be very cautious and we not may not be able to report it until we ship it and it shows up in the numbers and even then we may not be able to say much about it, but you're going to know what it is. This is a really big nudge nudge wink wink that over the next year Kattos is really expected to explode their deliveries of drone either weapons or Valkyries or um engine systems to help enable bombing campaigns or otherwise. Keep in mind there's constantly been this talk about the United States being critically low on munitions after the Iran war. These right here are examples of Boeing uh JD dams LR long range. These JD dams get fueled by a turboan which is basically a jet engine. And take a look at this. Katos recently uh Ktos is providing Spartan J85 engines. Those are their turboan engines that they produce to support Boeing's JDAM production contract. So in other words, Boeing is hitting up KTO saying, "Hey, can you guys help supply these jet engines for our missile program basically with the Department of Defense?" Now, KTO is a very small company, less than $10 billion company, but here's the smart a Spartan line of jet engine. That's kind of what it looks like. Kind of looks like a bathroom fan that you put in your bathroom, you know, like the fart fans. Uh, and then over here, a little bit less of a fart fan and more of like a jet engine look. This is uh a jet engine for cruise missiles, collaborative combat type aircrafts and other unmanned aerial vehicles. They also produce the uh the Valkyrie aircraft. That's somewhere in here. I think I believe that's this. This is under their their air, but I I believe it's the Valkyrie, but I'm not sure. But anyway, they've got a Valkyrie uh aircraft system. Oh, here it is. It's the XQ58 Alpha. Yeah. Yeah. Okay. It was the Valkyrie. That was Valkyrie. The Valkyrie. These things trade for somewhere between $3 to $10 million a piece. And what I think is really interesting about the KTO's numbers is that if you just look at Valkyrie production alone right here, they think they can get to about 40 of these produced per year. If I assume a sort of midpoint of $6 million per Valkyrie, 40 per year times 6 million would be $240 million of annual potential revenue. That's annual potential revenue. Uh they only produced about $5.9 million of Valkyrie revenue uh last quarter. So very very small portion of their business. uh their product sales right now sit at about 237 per quarter. So that alone would potentially double their quarterly revenue uh or or a quarter's product revenue. So let me just draw that out to be really clear to not be confusing. 200 you know 40ish mill roughly what they make from products in one quarter right now. a full year of 240 million Valkyrie sales would basically, you know, double one quarter or add 25%, you know, to their product side per year. Just interesting stat, interesting way to think about it. But this is sort of like a smaller call option in the business where they really seem to make a lot of money right now is on the Spartan engine. They call it one of the single largest opportunities with tens of thousands of those systems expected to be sold. Right now, we're planning initial orders of 3,000 Spartan Turbo jet engines. We expect to produce an additional 5,000 in 2028. Each of them worth about $50,000. So, if you do 5,000 in 2028 at uh 50,000 of them, uh that little calculator I was using does not have enough zeros for this. 5,000 times 50. That puts me at this number one two three 200 that's another 250 million right there just from the jet engines. So you really have growth verticals coming from not just these jet engines not just the Valkyrie UAV but then also the de droning technology which they're like nudge nudge hint hint we can't really tell you about it right now but you'll see it in our numbers. Interestingly, much like how Elon Musk is talking about getting into making components for jet engines for Elon's purposes, those would be turbine gas engines uh to run continuously to power data centers. Here, Katos has a Blade Works facility in Oklahoma where they've recently broken ground to help produce these turbo fans. Their hypersonics business is on pace to double from 2025 to 2026. and they expect their KTOS engine business to be the largest and fastest growing in the company's history. So that's their expectation especially since uh China and Russia are going deep on hypersonic missiles. And remember what we have right here, China supplying jet engines for those jet engine drones that Russia is using against Ukraine. Big business. So, here's a small market cap company that's doing exactly this sort of vertical of information or of of product. Here's the problem. They have negative free cash flow. We're expecting somewhere around negative 100 million of cash flow per year on average though this quarter they were sitting at about 47 already. That's a lot. So, it might even be more. Forecast negative free cash flow is negative uh 95 million. It might be more than that. Their balance sheet is okay now because they raised a bunch of money. They issued a bunch of stock. They raised a bunch of money. So they have about a billion bucks free of free cash flow. 1 billion of free cash flow. So if you take uh 200 mil of capex per year, they have five years of capex budget basically. So that's pretty good. You know, they they've got a decent balance sheet. Low on the long-term debt side. Revenue growth overall growing about 22.8%. 8%. I've got uh gross profit coming up about 21% suggesting that their margins are relatively stable. We uh have got the Karp information. And then here's the problem. Valuation. Valuation of the company is a little bit rich right now. It at at the future margins, the net margins they expect. I mean, their net margin right here is shamefully low. Their net income is 11.9 divided by 371. Net margins 3.2% right now. So forecast margins put them at close to 12 to 13%. That really means they justify about a 1.3 peg. So they are expensive. They are not cheap. You can I mean right now they're trading for software multiples. So, if we pull up the stock AI tool, we're going to see that right now the stock AI tool is telling us this company is on the more expensive side. Uh, so here's how we're going to do this. We're going to open up the uh Reinvest terminal app and uh you can see we got the little terminal tab activated at the top right there. We're going to type in KTOS and uh we can see here the balance sheet is rated heavily. I would agree with that. pricing power e margins are stable so it's pretty neutral there moving average the stock has come down a little bit uh but the valuation is really high so we have a red flag on valuation so we're going to expect that it's actually going to say you have a negative forecast rate of return here so when we open this up sure enough there it is -62% potential forecast on the stock price that's bringing it down to a fair valuation for the company right now it's very pricey and it's gone through one heck of uh a move here. Let's go zoom out for a moment on the week chart. Take a look at that explosion that it had. It really meme rallied and they raised money during the meme rally which was perfect. Beautiful raise money from the meme squeeze. But now they're coming back down to reality and uh frankly this could be a buy if it came down to about 24 bucks uh because that would be a technical retracement and it would really closely align with the fair value estimate that the stock tab has for this company. Uh now if you scroll down through this company you can actually automatically see a lot of the information that we have. This is the Meet Kevin app. Uh you can see a lot of the information here such as that doubling of the hypersonic business to potentially over 700 million almost to double again next year. The unit economics on the jet engine. A lot of this that you know we manually researched is is already just built into this which is really phenomenal. This is a a cool product that uh reinvest my startup is is building. Uh so we're very very excited about it. But this to me, this sort of defense side of stock investing isn't going anywhere anytime soon. Mostly because the world is unfortunately remilitarizing. And I hate saying it, but I think the way you have to put this together is you have to put this together as uh you've got over here you've got the US. Okay. Then you've got uh Europe and NATO. Europe and NATO. And then you also have Canada up here. Okay. Europe and Canada. They don't trust America under Donald Trump. This is obvious. Okay. So, there's a wall between the US and the ally Canada. There's a wall between Europe and Canada or Europe and NATO and then the United States. That's exactly what Russia wants. All right. Russia can take advantage of this and so can China. Especially if we're critically low on munitions. You know, we got to pump pump. We got to print more money and spend more money on defense. And then you've got Russia, North Korea, Iran, and China. And do you think they are bickering with each other? Is China teriffing Russia? Is Iran making fun of North Korea or China with memes or calling them morons or whatever? No, these guys are getting stronger. And that's where Germany, for example, is now like, "Yo, what the f? We got Russian drones, Russian attack drone drones showing up in Germany." So really, what you have is this well disaster, A, but B, what you really have is you have Europe going, "Oh my gosh, we need to spend more money on defense." You got Canada going, "We need to spend some more money on defense. We might be a little geopolitic like isolated in terms of region." You know, you have Greenland, I didn't even mention them. Greenland for whatever that's still worth. Talking about um uh some more some more military funding along with Denmark. Obviously, the United States has to blow more money into resupplying all the munitions munitions we blew. And then of course all of these guys over here are rearming, especially since the IAEA just came out and said, "Oh, we have no idea like we what's going on with Iran's nuclear program. We have not had access to their nuclear facilities or their now fourth announced nuclear enrichment facility in Espahan or period py pyramid mountain. We don't have access to this. We don't have color on what's going on with their nuclear program. We don't know where their nukes are. So now you have nuclear proliferation where other countries are like, "Oh, let's get into having our own nukes, too." Plus a remilitarization of the world. And then there's Kattos, a little $9 billion startup making engines for bombs and drones. Too happy, Kevin. Too happy. No, I'm not. I'm not I'm not associated with Kattos. Uh not paid by Kattos. I'm not investing in KTOS. Uh, war sucks. Uh, I hate all of it. But the reality is this is what's happening is the world is rearming and the defense contractors are going to get a good chunk of dollars for helping rearm the world. >> Why not advertise these things that you told us here? I feel like nobody else knows about this. >> We'll we'll try a little advertising and see how it goes. >> Congratulations, man. You have done so much. People love you. People look up to you. Kevin Praath there, financial analyst [music] and YouTuber, Meet Kevin. Always great to get your take.