Why Palantir Stock is Crashing | PLTR Analysis.

hey everyone me Kevin here we need to

talk about palente here now palente here

has sold off 177% since some of the

recent news that has been going on we'll

talk about that and we'll also talk

about palte valuation in this video but

what I want to say up front is usually

sell-offs like this are overblown and

there will be a bounceback unless of

course the stock is only propped up on

some form of momentum which could

potentially start fading we're going to

talk about that we're going to be going

through the annual report for the

company the earnings calls for the

companies we're going to be looking at

fundamentals of the company uh what's

going on with the stock of the company

and some projections for the company and

of course also we'll we'll start with

the news but I want you to know that's

the basic part basic part is the news

the details and the fundamentals what we

really want to talk about here so let's

get started uh first let's just

understand uh why we're making this

video uh paler is attracting a lot of

attention today because it's stock uh

has been on this euphoric uh uh rally

essentially this incredible run really

since Jim Kramer tweeted that uh paler

wasn't going to go up in the stock price

and you should not buy it unfortunately

via the Kramer effect if you will we

could actually see uh two different uh

tweets from Jim Kramer that give us a

little bit of a heads up of what might

be coming for paler the first tweet that

we get from Jim Kramer is actually right

here uh I wrote in September on

September 18th I wrote Jim Kramer just

said paler is a cold stock it's a meme

stock it's a stock that has momentum

because individual investors keep piling

into it it's not even really a stock

it's just a barometer may or may not

actually be doing well as a company uh

so mind you I and I retweeted this but

but from this moment palente even with

today's decline in share price is still

up 200% from this Kramer moment uh now

and you can watch that video you can

follow me there on X and you can see

that video in full but Jim Kramer if you

want to look at the Jim Kramer effect he

did also

tweet today now some people might see

this as a little bit of a warning is you

could see this tweet here is paler will

be back and uh Jim Kramer has turned

decidedly bullish about paler over the

last few uh few months here uh worth

knowing that uh there are questions

around what exactly does the paler

Corporation do please explain I think

one of the best things that you could do

if you ever really want to understand

what a company does is just read the

earnings call of the or or sorry the

annual report of a company earnings call

is actually probably not so useful for

explaining what the company does so I

apologies for that but the annual report

is ideal when you look at an annual

report uh you don't actually have to

read that far into it because usually in

some of the first pages of the document

you're going to get some business

descriptions about what they actually do

uh and so I want to show you some

highlights here just to plant the seed

of what's going on then we'll hit some

more of the news and the details so they

build software that empowers

organizations to efficiently integrate

their data their decisions and oper

operations at scale basically they were

AI before it was AI I've always called

the paler the real AI player because you

know their project or or their paler

Gotham product or their Foundry product

basically their commercial and their

governmental software has been talked

about and in use since back when I used

to volunteer for the police department

as a police explorer spent you know 1500

hours on the road with law enforcement

we would always wonder how is it that

chain of command knows that tonight we

want more Patrols in one particular area

and then all of a sudden more crime was

popping up over there or another one was

I remember working at Job juice and I'm

not sure if they were exactly using

paler or different software but they'd

say you know it's weird that software

today says we need to have four staff

what it's dead why why four staff

busiest day of sales ever it just all of

a sudden comes in this is basically AI

before it's AI it's making seasonal

pattern connections linking not only

seasonality but weather with uh local

events local charity events local you

know school events whatever it

integrates all of this data together and

then tries to provide you insights you

can do the same thing frankly with the

government and crime uh frankly there

are some police departments that are

sending out uh lists of where all the

concealed carry weapons owners are or

like what their names are what's

interesting with that is you could take

a software theoretically like paler take

all of those names find pictures of all

the those people online use that data to

then sell it to anyone who's got CCT TV

cameras anywhere in the world except for

China because they don't want to do

business with China KN but anyway you

can sell that data to anyone in the

world and somebody who has cameras

outside their house or more likely

business could have little boxes that

pop up and say oh that person facially

recognized comes up in the CCW uh

database they might own a gun they might

be carrying a gun in your you know place

of business right now these these are

just examples

uh and and very basic examples mind you

of like old AI this isn't even like new

llm AI mind you they're actually kind of

bearish on llms themselves which I

actually thought that was really

interesting they think chat is a dead

end they don't want so when if you're

wondering like what you know what what

kind of AI I I think their earnings call

is very fascinating they say it very

very well here they go in and say our

paler AI was built for reality

chat was always a dead end instead we

viewed llms as a new runtime for AI

labor to catch her productive value of

AI you need intermediate representation

of your Enterprise that AI can actually

interact with okay these are big words

basically what they're trying to do is

they're trying to automate things at

companies and a great example they give

of this is that companies can now upload

CAD files for let's say their car

designs their mechanical installations

and

cars and they can do in minutes what

takes 100 hours for a human you know

this is their example right so they're

giving you their best examples on their

earning call here so that's a little bit

about what P paler is it's a software

company right they make software that's

designed to help you with efficiency now

this efficiency part will actually

become very important when it comes to

the news that just came out and

government contracts uh in fact I want

to play you this this is um I'm not

trying to make this a pitch okay but

this is from my course member live

stream I'm going to give you an example

here I I do these live streams every

morning uh every day of the week you

know unless I've got some kind of crazy

commitment early in the morning um so I

would say I'm like 95% of the time uh

we're doing our course member live

streams every single day uh and uh and

I'll write out sort of these these

thoughts about what's going on uh in not

only the economy or theories or whatever

and in this video I was talking about

how uh the pH of the labor market could

be upset but what I also might end up

coming up to companies like paler and

this was filmed on February 12th you can

see it's on the listed video uh February

19th is what today is this is when we

have the paler news and I just want you

to hear this and and see what you think

about this problem is the company the

the you know uh startup he works for

suggests uh a

possible uh slowdown in Imagine This

government

contracts uh warning for paler SL he

doesn't work there but um you

know close to let's put it this way I'll

summarize it for you four days ago I

argued that people who work in Silicon

Valley are starting to see cuts from

government contracts or the potential

risk that they may not get more hours I

was talking about uh uh you know

somebody who who wants more hours at

their software job uh and how there's

talk about a potential slowdown in

government contracts and if they end up

getting Cuts they might not end up

getting more hours they might actually

get fewer hours they might actually see

layoffs and so this is where if you look

at the uh professional and business

services hiring so

professional uh professional business

services hiring St Louis Fred if we pull

this up really quickly we could see a

Slowdown in white collar workers

basically being hired uh and so we're

right now in December 2024 sitting

around some of the levels that we saw in

2014 or 2015 in terms of professional

hiring uh and also still sitting at

levels that are roughly similar with

right before 2008 over here in terms of

hiring so certainly lower off peak

levels here and this is leading some

folks uh to to wonder like okay hey you

know is this is this going to be

something that uh that suggests AI is

starting to replace workers or are

government contracts potentially going

to get cut

uh via Donald Trump and Doge wanting to

save money uh

so paler earnings call actually talked

about Doge before we heard of this

update from The Washington Post which is

the news of today I'll talk about that

in just a moment but I want you to hear

about Doge from them which they actually

pronounce well I they pronounce it in a

way that it's like impossible to oh

doh yeah okay so let's go find this

section right here paler real

competition is the lack of

accountability in the government forever

software projects that cost an insane

amount of money that don't actually

deliver results end up being funded by

basically the Deep State and when

something like Doge goes in it starts

cutting contracts for all of these bad

companies it actually leaves more money

for good companies like paler see paler

here talks about how software had been

created for the government that cost

billions of dollars and didn't work and

then paler comes in and does the job and

actually gets the job done and only cost

millions of dollars so they think that

meritocracy and transparency coming to

the government will actually be good for

paler and good for America and so this

is why I started the video off by saying

it's possible this latest paler selloff

could be a little bit overblown I'll

talk about you know obviously some risks

obviously but this is in their last

earning skull so so maybe they saw some

of this writing on the wall uh but uh

you know short of uh of basically saying

hey guaranteed pound here are safe from

any kind of cuts these are just some

things to watch for now this Washington

Post article that came out today argues

that the Pete Hef you know former Fox

contributor now the defense secretary

has ordered senior leaders of the

Pentagon throughout the US military to

develop plans for cutting 8% from the

defense budget in each of the next 5

years okay

so basically if you take the defense

budget and you cut off

8% every single year you're down at 66%

of the defense budget which If I

multiply that by today's $850 billion

defense budget uh they want to see it

come down uh you know from $850 down to

66 it take it down to $561 billion so

they potentially want to cut2 to $300

billion from the defense budget which

maybe that's possible if you're not at

war with Russia uh or or Ukraine well

you don't have the Russia Ukraine

conflict or you don't have the Israeli

and Gaza conflict uh and maybe you even

have some money left over to invest in

an iron doome in America who knows this

has been talked about as

well but this budget cut whether they're

talking about cutting 8% out of like the

growth of the budget every year or

literally from zero growth cutting down

to 92% every single year is not entirely

clear it's going to be something that's

going to get opposition in Congress

obviously so we'll see what happens here

uh but this is the news that led to this

idea of oh okay hold on a second could

this end up hurting Palante here Trump

Administration wants certain things to

be exempt like the border modernization

of nuclear weapons missile defense

acquisition of submarines one-way attack

drones and Munitions which talk about

drones is actually very interesting the

New York Times has a piece about how the

CIA is expanding secret drone flights

over Mexico likely in coordination with

Mexico but the point is they're

collecting data uh and they're passing

that data on to Mexican officials uh

they found that drones are actually

really good at identifying fentanyl labs

for example because of the chemicals

that these fentanyl Labs use are really

easy to spot from the air and I think

paler software could actually be useful

in helping these drones do their jobs

but let's be clear there is also

competition right paler is very popular

uh paler has been very popular as well

in fact if you look at this 2019 article

from The Washington Post they actually

talk about how a bunch of insiders who

used to work for the government now work

at paler and that's one of the ways

paler keeps getting these contracts

because the you know the people who have

connections with the government who make

the decisions work at paler so you've

got this really kind of like symbiotic

relationship this uh this by the way was

a Washington Post piece about back when

pal paler had a lot of drama going on

regarding ethical concerns about the

privacy and the data that they collect

on illegal immigrants uh and you know

they talk about hey look you know we're

trying to help the government a lot of

people are like this isn't fair paler

shouldn't be Pro profiting off of people

you know getting kicked out or deported

out of the country and so some workers

were filing petitions and blah blah blah

blah but anyway paner makes a lot of

money from the government and and this

is important this is why the stock is

getting hit uh in fact about

66% of their revenue comes from the

government so let's take a look here so

we can actually I can want I want you to

actually see where I'm getting this data

I don't want you to think I'm just

making this stuff up uh okay so first of

all uh Revenue growth with the

government

was 44% from the government

year-over-year last quarter so great

government growth however it's not just

the United States they're also expanding

their Partnerships with the United

Kingdom uh and other countries but but

growth in international is actually very

very slow I want to say it was

133% of their business comes from these

International countries and that only

rep is that section is only growing by

about 4% so I want you to see that

uh that is right revenues here we go

okay 66% of our Revenue came from the

United States 34% came from abroad but

from a growth perspective we only here

it is we're growing around uh 4% on the

133% of our company that includes

Continental Europe so yes let's clarify

this 34% of their International or

revenue is

international 13% of it is Europe and of

that 13% it's only growing at 4% so

you're seeing most of this company's

revenues and growth coming from the

United States both the United States

government but also United States

commercial companies now why is that so

important well it's important again

because if the government is trying to

cut contracts is it possible paler could

lose some contracts and is that why

paler is potentially selling off back to

the line that we always talk about uh in

our course member live streams

keep this in mind you can always join

these courses uh but um and we're going

to have a pretty large price increase on

these courses uh starting at the end of

the month go to meet kevin.com to see

him just join the trumponomics one it's

the most popular one right now it gets

see into the course member live streams

lifetime access to that Alpha report the

new lectures on building your wealth

under Trump uh but uh I'm going to be

releasing a lot of new lectures and and

by the time we do that we're going to

have another massive price increase for

the trumponomics course so check it out

if you have questions email us at kevinm

kevin.com but anyway uh in and we talk

about this kind of stuff almost daily I

literally talked about stop-losses on

paler this morning in the course member

Liv stream uh before this news came out

just because we've been keeping an eye

on the potential for this happening but

anyway we're going to talk valuation

here next but I want to give you sort of

all of this information on paler because

I think it's very useful uh keep in mind

they're also working uh you know with

countries in Africa and South America

you

name something else to know is that

they're very concerned about China they

argue that we are in an AI arms race and

they actually say that a deep seek is

basically a warning shot it's like the

shot her across the world uh shot her

around the world you know kind of like

Anyway old US History kind of stuff but

anyway they talk about how China

basically steals our IP they don't want

to work with China we also have to stop

believing that you know an anchor broke

deep sea cables communication cables in

Europe it was probably China and we also

have to be really careful that why is it

that all of a sudden GPU sales are

exploding in Singapore you know Nvidia

sales blowing up in Singapore it's a

tiny island nation pretty sure there's

some sanction evasion going on there and

basically China's funneling Nvidia chips

probably for deep seek through uh

Singapore another thing to keep in mind

is the company does give you a warning

and this is something to know about the

short term for the stock q1 and Q2 are

usually the worst in terms of growth so

they're giving you that warning a lot of

people aren't paying attention to that

but seasonality uh is the best when the

government budget ends in Q3 and Q4 and

it's the worst in q1 and Q2 so watch

that and they're still growing at about

18% with their existing contracts but

their new contracts come in bring their

growth to closer to the 40 to 50% range

that'll be important in just a moment so

let's understand some fundamentals here

this company is very very rich okay they

they went from uh $4 billion in current

assets to about $6 billion in current

assets over the last year that's a

growth of about $2 billion they only

have about $427 million in current

liabilities other than like deposits or

deferred revenue uh they get some lease

revenues in there as well whatever big

deal very very very little current debt

very little long-term debt I mean

honestly almost no long-term debt a

couple hundred million dollars here very

small make sure I said million here not

billion on these numbers uh and uh the

company has no problem with cash flow

that is not a problem here they have a

fortress balance sheet part of this is

because they keep issuing new shares so

you have to watch for this over the last

year they issued about 150 I round it

here 150 million more shares at $100 a

share that's worth $15 billion but wait

a minute their assets only went up by $2

billion see

like that's the kind of dilution that

that does hurt a potential stock so just

so you know how that works if you're

like a real estate company I don't know

I'll make one up house hack and let's

say we issue uh 25 million shares and

raise you know $40 million or whatever

right or or $30 million $35 million it

doesn't matter you raise some level of

of money you issue those shares if you

take that money and then you go buy so

let's clarify it you raise 25 million

shares let's just make it easy and say

you raise $35 million you take that $35

million you buy $35 million of

discounted real estate that's worth $45

million you actually made all of those

shareholders money all of that those

shares literally turned into assets that

you bought for a discounted value and

everybody gets the upside of that that's

not what we see here in terms of the

balance sheet now the share price has

gone up because there's a lot of

momentum right now for artificial

intelligence and paler is seen as sort

of like the king of this but keep this

in mind this share dilution even though

the company is buying back shares that

share dilution is a negative weight uh

to Palante so do watch for that they are

also conducting stock by backs which is

good but you still have to deal with the

weight of insiders dumping this stock uh

and it's worth noting this stock tweets

twits mentioned this paler Insider

transactions in 2024 sells $3.1 billion

buys $0 nobody's buying this stock who's

an Insider they're getting rich off of

this stock because you have the AI

momentum Fortress balance sheet good

growth good growth it's not great good

growth uh it's so this is one of the

reasons why a smaller Catalyst uh like

you know potentially I mean look this

this ice partnership is probably

actually good for paler this is that

2019 article let's go ahe and close that

but that's why you do have some concerns

that this Heth announcement could end up

hurting paler in addition to that you've

got Alex karp's plan to sell $1.2

billion worth of stock that apparently

he filed back in December and it only

just now became public now and he could

start selling about 10 million shares

between now and September 2025 so so you

know if I take I mean how many days is

that we're in March uh almost to March

that's about 6 months how many trading

days are we going to have there 180 days

for 6 months uh let's say we have about

I don't know 70% of those days are

trading days 126 trading days 126

trading days

9975 divided by 126 trading days yeah

sell about 79,000 shares uh per day to

to get this done if you want to sort of

butter it out entirely like that which

that works out to about $8 million a day

paler probably has enough buying

interest to cover that that's something

to keep in mind remember when Elon Musk

started dumping shares at Tesla it

created some pain okay so we saw this

now let's talk about the growth really

quickly uh so here we go us Revenue grew

at 52% year-over-year this is fantastic

that's the average of that commercial

revenues grew at 64% 45% year-over-year

on government so government's already

been slowing down down compared to

commercial but this is important because

if Government growth which I think

should go up honestly because of uh like

Doge I mean they're all big fans of

efficiency uh so their their product

helps you be more efficient right but US

government revenue let's just say worst

case scenario that government revenue

went to zero and you only grew on

Commercial Revenue what does the

valuation of this company look like also

before we hit that I want you to see

this uh let's see here I want you to see

what's going on with their net income

because their net income is great and we

want to see growth of that because that

uh that EPS is going to matter but when

we go through their growth we're using

adjusted EPS why does adjusted EPS

matter adjusted EPS just know they're

adding back in their stock comp so net

income at this company isn't that

fantastic so in 2024 you have $467

million of net

income that's after

$691 million of stockcoming off over

there you've got that the point is one

of the ways that they're paying for a

lot of their staff is through stock

based comp it makes sense that a

software company but again it is stock

dilutive so just just know that now they

do make good money they've got good cash

flow but the EPS isn't that great

especially adjusted EPs and that adds

back to stock comom uh and we could

verify that too one of the things that

you can generally do is when you look at

an earnings report uh or even like an

annual report you get what I generally

like to do is I just type in

adjusted uh earnings and then you

usually get an answer in terms of how

they break down what their earnings are

compared to Gap financials now I want to

keep it simple I don't want to go

through too much here but as we go into

their valuation just look at this

adjusted earnings per share

14 their Gap earnings per share which I

again I'm not going to go through all

the adjustments right here but they

usually also account for stock comp

whereas adjust it doesn't their Gap is

only three cents per share so that's why

when I say they're not making a lot of

money I'm saying they're not making a

lot of money for shareholders right now

they make plenty of money their margins

are fantastic and actually margin

expansion might be something that helps

them if you look at their margins their

gross margins they're over like 75% it's

fantastic not necessarily their net

margin but look at this revenues of 652

divided by 827 what is that

78.9% margin that's fantastic now yeah a

lot of that money is going into sales

and marketing I mean look how much sales

and marketing grew you know with their

new AI coding boot camp where they're

trying to get people really into using

this product their marketing grew 46%

now that might be okay though because

their revenues after all

are up 30% overall so that does imply a

little bit of negative operating

leverage uh and they are spending more

on R&D they're spending more on GNA it's

a growing company but point is when you

get to the bottom

line your earnings per share on a gap

bases are pretty low now again why does

that matter because if we go over to a

spreadsheet we can look at the forecast

for this company and understand its

valuation so if you zoom in over here

you'll see EPS forecast by Wall Street

what do you end up getting Wall Street

this is adjusted so I'm going to put the

a in front of it adjusted EPS forecast

54 cents in 2025 67 cents 26 83 cents a

buck 06 a buck 35 does not include Gap

EPS okay so gap's going to be way lower

so adjusted EPS is growing at an average

right now of about

25% the share price today is about 125

bucks before the drop we'll change this

in just a moment uh and that c gives

them a Ford EPS or forward PE ratio

price to earnings ratio today so at 2025

I'm not going backwards I'm looking

forward backwards would be even worse

229 is the PE Ratio if I divide 229 by

that forecast growth I'm at a PEG ratio

of like nine which is really bad free

cash flow to market cap is also very low

it's less than 1% you usually want this

to be like 3 to 6% you know how much

cash flow the company's actually

generating relative to the market cap

cuz we can look and go hey they created

$2 billion of cash flow great but how

does that compare to their value

you want a company that has some high

market cap and a lot of cash flow

generation right so if you take an

expected PEG ratio and you say this

company's EPS is going to keep growing

at 25% well you could see what the stock

would decline to if it aligned with an

expected PEG ratio now I'm not saying

that's what's going to happen what I

actually think is that if Government

revenues do what I think they're going

to do which is hopefully go up because

they use pal volteer more and this

company actually grows more you could

probably bump all of these growth rates

on average over the next four years to

32% that might be too bullish but let's

go with 32% in the event that you use

32% its PEG ratio goes down to about

7.18 uh which which is still very very

expensive right and if I change that 32%

growth over here the share price

today is probably still going to have to

be lower the valuation that I could get

to even with 32% growth assuming no

declines for government or commercial

contracts is negative 62% in

2029 from today it still be netive 6%

now if I bump this to 50% growth I'm

still overvalued by 41% today but I

could grow to about 181 bucks in 2029

which that is valuable with 50% growth

but just be careful though because Tesla

said it was going to grow at 50% and we

saw what happened anyway the good news

is I think commercial is going to

overtake uh government growth I think

margins can expand which will help this

you do have some downside risk of a

potential for Department of Defense

spending reduction less war spending

dilution 66% coming from the United

States

seasonality uh and then obviously macro

is going to be another consideration as

well I personally would love an

opportunity to buy paler a lot cheaper

like if there's a major recession or

crisis or whatever it's a fantastic

company and I actually think they've

built up a fantastic moat and they'll be

able to maintain great margins for the

long term I don't think their product is

a commodity at all so I'm excited about

this company I just do recognize there

are a lot of things whether it's

fundamental or or dilution or Gap EPS

there are a lot of things at this

company that could hurt momentum in the

short term so bottom line is the

Department of Defense contract issue

overblown absolutely in my opinion

because it should be helping them not

hurting them is the valuation overblown

though yes is there a risk that this

movement right here was driven by

momentum yes watch levels 105 9068 thank

you so much for watching if you like

this video make sure to subscribe and

we'll see you in the next one goodbye

and good luck why not advertise these

things that you told us here I feel like

nobody else knows about this well 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 PA there financial analyst and

YouTuber meet Kevin always great to get

your take