Is Palantir Stock The Next NVIDIA?

TL;DR

Palantir may have substantial growth potential, but the transcript does not establish that it will be the next NVIDIA. Its revenue rose from $595 million to $2.2 billion over six to seven years, while its price-to-sales ratio reached 22.1 and its market capitalization stood at $49 billion. Read on for the specific growth, cash-flow, valuation, and business-model evidence behind this cautious assessment.

Transcript

guys paler is up huge in the last year and there's a lot of people especially on YouTube and Twitter calling for paler to be the next Nvidia the next $500 per share this company is taking over the world that might be the case but we're here to remember that we buy based on fundamentals and then we're going to hold based on emotions so it's importan... Read More

Key Insights

• 🛀 Paler has shown impressive growth, with revenue increasing by 33% to 40% each year over the past six to seven years.
• 😘 The company's market capitalization has fluctuated significantly, reaching a low of $5 and currently standing at $49 billion.
• 🥶 Paler's strong free cash flow and its ability to attract both government and commercial customers indicate its potential for further expansion.
• ✋ The stock's high price-to-sales ratio raises concerns about its valuation compared to industry peers.
• 🖐️ Emotional investing should be avoided, as fundamentals play a crucial role in long-term success.
• 🤨 Paler's CEO's controversial statements and accounting practices have raised some concerns among investors.
• 🥹 The stock's volatility highlights the importance of holding onto investments based on fundamental analysis, as Paler has recovered from a significant decline.

Questions & Answers

Q: Is Palantir stock the next NVIDIA?

The transcript does not conclude that Palantir will be the next NVIDIA. It describes Palantir as an incredible company with strong growth and data capabilities, but argues that investors must evaluate its fundamentals and the price paid for its future cash flows.

Q: How much has Palantir stock increased?

Palantir recorded a one-year return of 168% and a year-to-date return of 35% at the time discussed. The speaker warns that strong past performance does not ensure continued gains, citing how another previously dominant stock later became the S&P's number-one loser that year.

Q: How quickly has Palantir's revenue grown?

Palantir's revenue increased from $595 million to $742 million, then to $1.09 billion, $1.54 billion, $1.9 billion, and $2.2 billion over six to seven years. The transcript characterizes these annual increases as generally ranging from more than 20% to about 40%.

Q: Is Palantir stock expensive based on its price-to-sales ratio?

Palantir's price-to-sales ratio was 22.1, which the speaker considers quite expensive. For comparison, the transcript gives ratios of 13.9 for Microsoft and 11.4 for Adobe, while acknowledging that Palantir's faster potential growth and stronger balance sheet could justify some premium.

Q: What does Palantir do for companies and governments?

Palantir works with companies and governments to identify problems and use their data to find solutions. The transcript says Lennar Homes used Palantir in its home-building bidding process and that Tyson Foods saved $700 million per year after hiring Palantir to address data problems.

Q: What does Palantir's free cash flow show?

The transcript reports $700 million in free cash flow in the latest year discussed, compared with $143 million over the preceding five-year measure shown. It also says Palantir had roughly 12 consecutive quarters of free cash flow, making cash generation a key fundamental to monitor.

Q: How strong is Palantir's balance sheet?

Palantir had a market capitalization of $49 billion and an enterprise value of $46.5 billion in the figures discussed. Because enterprise value was lower than market capitalization, the speaker says the company had more cash on hand than debt, which he views positively.

Q: What risks should Palantir investors consider?

Palantir previously reached $45 per share on January 27, 2021, before falling to about $5.68, illustrating significant volatility. The transcript also recalls a quarter with negative $285 million in free cash flow and warns against buying solely because momentum may attract another buyer at a higher price.

Summary & Key Takeaways

• Paler has seen a one-year return of 168% and year-to-date return of 35%, showcasing impressive growth.

• However, past performance does not guarantee future success, as demonstrated by Tesla's decline from being a top performer to losing value.

• Considering the fundamentals is important, as Paler had negative free cash flow and a high multiple at its all-time high.