Okay folks, so I need to talk to you about Madame Palantir. There are but few stocks out there that are quite as controversial and debated as this one, at least historically right these days, poor old Palantir doesn't get much coverage interest In even batting a second, Ayat Palantir has gone down dramatically as the stock price has gone down and as the overall market has gone down. It also tends to be the case that people are most interested in stocks when they are on a momentum cycle and least interested in them when they are on, well, a dysphoria cycle. Which means that at the end of the day during good times, the bulls are amplified and during bad times, the bears are amplified.

But of course that is a huge disservice. Volatility of a stock should not be allowed to cloud the opinions on an underlying business model. A stock and a company are two different things. and while volatility in a stock can allow you to get really, really good entry prices on an underlying business, or can allow you opportunity to trade off of at the end of the day, If you want to find a conviction play for the long term, you have to understand the underlying business and the apparatus that surrounds the actual stock.

And in this video, I want to violently explore whether or not Palantir is a good buy at the current trading price at 7, 29 or whatever lower amount it's going to be at By the time you watch this video and before we get into it, this video is brought to you by Moomoo and their up to 13 Free Stock Promotion Link down below. They are essentially paying you to try out an excellent and powerful trading platform and they think that you're gonna stick around with them for quite some time after, and I do as well. But at the very least, hey, 13 free stocks is no joke. Valued up to two thousand dollars.

Link down below. Okay, so let's start with business growth. So the magic number with Palantir is 30 percent. Most of the Palantir bowls, including my own arguments in the past, have been working with a 30 year-over-year growth and revenue projection averaged out over the next 10 years to justify being bullish on the stock.

On top of that, of course, we do want to see a path to profitability and a closing in of losses. So how are we doing on these fronts? Pull up their latest earnings. They said for the three months ended June 30th, 2022, we generated 473 million in revenue, reflecting a 26 growth rate from the three months ended June 30th, 2021 aka the year before and for the six month period, a 28 growth rate. So 26 and 28 on these two different time horizons year over year, or certainly lagging the 30 growth rate.

Not by much, but they are certainly lagging it right so you would have to have higher growth in the future to get back to that average at 30 percent. Keep in mind though, that the five-year average according to Seeking Alpha is 35, whereas the sector median is only 18.47 percent. So Palantir is doing significantly better than the average in the sector. And they are doing slightly better overall than their 30 target if you look at the last five years.

But yes, don't get me wrong, the current growth is definitely disappointing. and it is lagging. Um, and Palantir just revised down their guidance to expect 1.9 billion in revenue, despite analysts expecting 1.98 billion. So why the slowdown? After all? customer account has increased to 304 from 169.

Just a year ago, their U.s business is up 42. Their commercial revenue is up 120 year-over-year What's going on to drag down the overall number when these numbers look so hot? Well, the answer to that in one sense is, well, the government. I feel like a lot of problems in society can be pointed at the government, but hey, that's another issue. Government revenue growth has been slowing down dramatically at the same time that Palantir has been focusing more on expanding their new and growing commercial segment.

Obviously, the main bullish argument for Palantir was, hey, you have this strong government backbone and then you have this commercial business being built on top of it. And the commercial business is where most of the growth potential is going to be. But the fact that the historical and core business model of talent here is slowing down in growth faster than most had expected is something that people don't like to see, and it is dragging down the overall numbers. Unfortunately though, the hard truth is that at the end of the day, whether we found this out this year or next year, there's only so much market that Palantir can take and gain from government, and we are just getting into that situation where Palantir is starting to lag and cap out at just 13 growth year-over-year in government revenue, and the curve downward has been incredibly sharp.

The year-over-year compares went from 66, which was solid to 34, to 26 to 16, and now to 13. and while the overall government sector is still growing year over year, the truth is that this is a major segment of Palantir's business, which is essentially dragging down the overall performance and should continue to do so. Of course, a lot of people on Wall Street will go, and they'll look at the business and they'll just focus on the bad parts and they'll say oh, okay, there's bad parts here, so whatever is happening from the good parts gets canceled out. And of course, if your analysis was based only on the government sector, maybe that was a fair analysis, But for most people who are actually bullish on the company, it was based on the commercial segment and to some extent the backdrop of government.

Not the growth of government government holding the core business, but commercial growing on top of it. And if you do look at the commercial assignment on a year-over-year trend, you see substantially better numbers 90, 103, 132, and 120. And these numbers are despite the fact that the first half of this year was the first half of a massive tightening. So I think with Palantir right now you're in the situation where government growth is transitioning away a lot faster than most analysts would like to see, but at the same time they are achieving what they need to be on an overall trend basis in the commercial segment.

I think that a lot of the investments that they're making are going to compound over the upcoming years, but it is true in my view that government should continue to drag down the overall growth numbers for at least the next couple of quarters until commercial can really start cancelling out that effect. But if you do look at their government business, I wouldn't count Palantir out too fast. Very few companies have the level of clearance that Palantir does with the government. Few companies have the ability to work in so many different departments and silos and overall organizations at the government.

Few companies have the technology that would be able to be helpful to such a wide array of uses at the government. and it would be Myvi very, very hard and expensive for the government to go and try to replace Palantir with something that they built themselves or with a different company. Palantir has a business model where you start at the front door and then as you're integrated into the system, it's very, very difficult to switch over to something else. There is a reason why a lot of government agencies still use Windows Xp, for example, because it's very expensive to upgrade to a new version.

So honestly, while their growth in government is still going to cap out, I don't think that that backbone of a business is going away anytime soon. In fact, I wouldn't be surprised if it continues showing at least some growth over the years. So anyways, yeah, definitely there's a hiccup in the overall growth rate, but I don't think that Palantir is derailed and I think that over the long run, you're still going to hit somewhere around that baseline at 30 percent. Okay, so let's go ahead and move on to path to profitability so we could look at this filing all day.

But the main line item to look at is this line here: Loss from Operations Three months ended June 30. If you were sitting on 146 million in losses from operations, now, you are sitting on what 41.7 million in losses from operations. That's like a 72 reduction in operating losses in a year. Meanwhile, again, revenue is still growing at a sizable clip, and if you really look at it, a lot of the losses and operations really come from sales and marketing, which have gone up slightly year over year.

But just the hair and really, this is only a big line item in terms of a percentage of overall pie. In the beginning, when the commercial segment is scaling up, the Palantir commercial segment is really a new business. and when you have a new business when you are just starting, how do you get clients? Well, you get clients by spending tons of money on marketing, and the marketing that you do in the beginning is going to cost more than the money that you're bringing in because you're just starting to bring in clients right? But over time as you bring in more and more clients all of a sudden, eventually if you're running things correctly, marketing becomes a lesser line item, Then eventually it's only just a percentage of your overall income that comes in. Imagine for a moment that you just opened a new burger joint that you have to spend ten dollars per customer to get in via marketing, and each customer only generates you like eight dollars of gross profit.

Well, you are leading with losses for quite some time until all of a sudden these customers are reliably coming back to you and buying more and more stuff. Then all of a sudden your marketing expenses become a lesser line item relative to how much you're bringing in. Even if it still costs you ten dollars to bring in new customers, you now have the backdrop of all the other reoccurring customers who you advertised and sealed in the past who want your burgers and are reliable customers. Now, of course, in the burger business, they don't work on subscription, but with Palantir, it works on subscription.

So you've locked in all these old customers and you've woven yourself into their business model and you're scaling them more and more over time. Point is that again, Palantir is spending a lot of money at acquiring customers and it sucks. but that's what you have to do when you're starting to scale up a business. It's not as simple as a burger business, but over time and and this takes a lot longer and might be a little bit more difficult to understand if you don't look at the nuances.

But over time as you take in more and more customers and scale them, marketing will become a smaller percentage of total expenditure and no longer become a massive issue for profitability. If Paluteur went and just gutted half of their marketing expenses today, there goes your operating losses, but then they wouldn't get the same growth rates, right? It's disappointing that growth isn't performing exactly as we'd want it to, but in terms of the overall condition, it's not that bad. to me. It seems like their marketing investments are well placed, so I guess what I would say is that talent here is still in a strong position.

They've just decided to continue playing offense when the market wants them to play defense, and they've been punished for it. Next balance sheet health. So this is perhaps one of the biggest reasons that I have continued to see value in talent here. We have liked a lot of growth stocks, but not all growth stocks have made the cut.

As we've headed into tighter and tighter market conditions, we have downgraded some, we have gotten rid of others and the reason is 100 percent based on whether or not they can survive a massive economic crunch, one that could get substantially worse than the one that we're seeing right now. I know you're not supposed to say that because ooh, fudster, but hey, it is what it is. If you get a much bigger downturn, A lot of these companies can't go out of business if they don't have enough money on their balance sheet. And in my view, Palantir does have sufficient resources.

They've actually shored up their cash position year over year. They now have 2.358 billion in cash and cash equivalents for a total of 2.9 billion in current assets. And you think about how much that is on a quarterly basis. Palantir just reported a 41 million dollar quarterly loss from operations.

Assuming that they don't continue to improve and shrink those losses, Palantir can continue operating as is for years off the cash on its balance sheet alone. but more importantly if necessary. And if things really do get bad, Palater can go tomorrow and say okay, we're going to go ahead and cut our customer acquisition, our overall marketing expense, costs, and all of a sudden, their operating losses are gone. Which means that when push comes to shove, Palantir has longevity on its side.

It can weather pretty much any bad macro environment, assuming, of course, that it is run properly. Of course, you can have somebody that doesn't know how to run a company, and all of a sudden they're leading with losses, even when the losses aren't resulting in more customer acquisition or useless customer acquisition. But to me, there's a lot of margin for error here, and I think that it's fine. So finally, that leads us to the age-old question: is Palantir a buy at these prices? I have liked Palantir at higher prices.

I have liked it at slightly lower prices. I have liked found here for a while based on the underlying business, but my view is that Palantir will go down as far, and as long as the Fed wants to punish the market in order to rein in inflation, and to some extent as long as Palantir misses expectations. I think that Palantir is down first and foremost, probably 90 of the reason it's down is because of the Fed's battle with inflation, but there's also the overall growth trajectory that people are calling into question when you see some of that government growth evaporating, but eventually the central bank war will be over and I think that Palantir, the business will enjoy above average growth that will get us back to that 30 percent rate. And in my mind to be quite frank with you, I think we're going to look back at this as a excellent buying opportunity, but I do continue to be unsure whether that point in time will be next year or several years from now.

It really depends on the trajectory of inflation, the trajectory of the fed, how that impacts the economy, and the commercial segment that Palantir is trying to grow into. And these are all concepts that are going to have a huge impact on Palantir's performance in the upcoming years: concepts that quite frankly, we have no control over you nor I, and concepts that quite frankly are going to impact every stock in the market. So yes, I would say that Palantir is a good value at these prices. I think it's probably going to go down more, but it is a good value if you look out five ten years.

Probably a good value even if you look out two or three years, but hard to say when you're going to get a macro condition that supports a steady appreciation of these types of stocks. Now, I do want to cap this video off with a quick note. So one of the biggest reasons that I see cited for why someone might not want to buy a growth stock right now as well, growth stocks have been beaten down massively, The near-term prospects don't look great, and a lot of these businesses are seeing a massive slowdown in growth rate because of this current economic and overall market condition. So it's like on one hand, you're not excited about the stock price and on the other hand, you're not excited about the business itself.

And while I do agree with those concerns in many aspects, I will say on a fundamental business-wise basis, the truth is that literally every growth stock is going through the same thing right now. And if you don't see value in putting in the effort to find deals during a bear market, what kind of market would you find value finding deals in Because the Bear Market is where the best deals are. That doesn't mean go gung-ho and buy every single deal, but it's like, hey, if you look at a stock and you believe that this is going to be a stock that's going to do very, very well when the market environment flips. Maybe it makes sense to get some.

Maybe it makes sense. The dollar cost average. Maybe it makes sense to buy some of the most aggressive debts. Maybe it also makes sense to have a very, very patient time horizon for when the stock is going to appreciate.

right? If you're a fundamental investor, somebody that likes the underlying business and not really the momentum or whatever, then your game is the time game. It's the patient game. It's the oh, I was patient to buy the dip. Now I'm going to buy the dip, but I'm also going to be patient for the recovery.

Now on this channel, we talk about a lot of short-term trades, but I do like to have a focus on long-term trades as well because I do believe that some of the best opportunities out there are actually in the long-term segment and you also get the better tax rates. Of course, not a Cpa, but you get long-term capital gains when you hold for more than a year and you put all this together and it's like, hey, there's a lot of opportunity out there if you start really looking. So anyways, those are our closing thoughts. Make sure to get your up to 13 free stocks with Moomoo down below.

Have a good rest of your day and we will see you in the next video. Make sure to hit that ravishing like button and subscribe.