why palantir stock is crashing

A lot of people are asking why is

Palanteer falling. It's at the moment

down 6 and a half% after rejecting that

psychological 200 level. In part because

it stopped at 189 front running that 200

psychological level and second

potentially because Jim Kramer said

nothing is going to stop Palanteer from

getting to $200. But that might be a

topic for a different video. Instead, we

need to talk about this Citron research

piece and see if they have any credence

to what they're saying. It's a short

piece on Palunteer. So, my goal is to

take a middle of the road analysis here.

I want to give you bullish information

and bearish bearish information based on

what Citron is saying. For example, I'll

start with something bullish here.

Goldman Sachs has a great piece in their

America's Technology section. They've

got a whole PDF basically outlining the

pricing power of how companies could in

the future uh not only take potentially

valuebased uh profits from from

productivity that companies experience

in addition to just seatbased charges

which ultimately lead to a compression

in prices or costs for AI but more

profits for the good AI companies.

One of the examples of those good AI

companies they give is Palunteer where

basically they say here Palanteer's

engineers can help a company fix their

data then put it together into their

ontological system to cater AI to a

specific business. This is why Palanteer

gets these big contracts. And because

you don't have to build out some kind of

fancy software UI, you could just rely

on essentially an LLM like a chat box to

talk to to engage with this data. You

actually have significantly fewer costs

for AI or software companies to set up

custom AI for businesses because people

could just integrate with the chatbot

which doesn't really take a lot of

custom UI which is brilliant. Like the

user experience is very straightforward

and basic. So, Goldman's actually really

bullish over the next 5 to 10 years on

software. Uh, obviously they talked a

lot about Salesforce and uh, you know,

the value that Agent Force can provide

and and they've got plenty of other that

they talk about here uh, in this piece

uh, including here some of these other

companies. Snowflakes, uh, Arctic Model

optimizing for enterprise workloads and

analytics, delivering low latency,

cost-effective inference inside its

platform inside of the platform. They by

the way also mentioned that inference

costs coming down should be good for

companies like these but also companies

like Palanteer obviously benefit from

lower inference costs which is really

what the deepseek moment was all about

was telling us and showing us that hey

yeah we might want to train with the

best chips available the best black

wells or whatever but we can infer with

cheaper chips the A100s H100s or maybe

even uh you know lower scale or lower

tier chips beyond that anyway a service

now, Salesforce, Twilio, Onesteream, uh,

Pigment and so on. So, they give some

examples here, but let's talk about now

the sort of more bearish side, which is

unfortunately what we get out of this

short piece here. So, uh, six round

research basically makes this argument

that Palunteer's valuation on a per

revenue basis or a pricetorevenue basis

is essentially cookie- dookie. So what

they do is they say that OpenAI is

projected to generate about $30 billion

in revenue next year. So think about

that. $30 billion in revenue. All right.

So how much money does Palunteer make

relative, right? Well, Palanteer makes

about on average $4 billion. Now we just

had our first billion dollar quarter.

And so if you annualize that, you know,

multiply by four, you get a $4 billion

quarter. So Palunteer obviously has

great income growth. It's been a

phenomenal exploder in terms of what

it's been able to pull off uh in terms

of growth and that's why people have

been so excited about it, but it's still

a fraction of what Open AI is projected

to bring in. OpenAI bringing in about

$30 billion projected in revenue for 26.

Of course, net income is going to be a

different story. uh Palunteer a billion

per quarter or if you take the growth

and add in growth that people are

projecting for Palanteer you could get

as high as 5.6 billion for the end of

2026.

The Citron piece is basically based on

this idea of all right if we take a

price to revenue multiple of OpenAI

which they argue is the highest multiple

of any SAS stock in the world. So

basically the multiple of 17 is already

insanely high. Then what you end up

getting is a Palanteer fair valuation of

17 as a multiple times 5.6

their their revenue

uh of you know B and then of course

divided based on you know how many

shares you've got outstanding. They see

a valuation of about $40

per share. Okay, that's that's their

take. The reason they value this based

on uh you know how many shares

outstanding is because we're taking the

valuation here, right? So price

torevenue multiple is the way they're

looking at it. So what's the market cap

of the biz uh and what should it be

divided by the annual revenue and they

get a multiple here. They say this

should be somewhere around $40 for

pounder on a share price. Now,

obviously, a lot of people look at that

and say, "Hey, you know, that's

ridiculous. It shouldn't be that.

Palanteer's got phenomenal growth." And

that's something that Citron mentions as

well is that yes, Palanteer has

phenomenal growth, but when you compare

it to OpenAI's growth, it doesn't really

hold a candle to OpenAI's growth at the

moment. And this is where some people

say, well, Open AAI is a bubble, right?

But that's exactly what Citron is

arguing that OpenAI, if you take

OpenAI's valuation and apply it to

Palanteer, you still end up with a stock

that's potentially 4x more expensive

than it should be. Now, what I always

like to do is I like to take a PEG ratio

analysis. So, I do a little bit of a

different analysis than a company like

Citron. So, I like to look at, you know,

what EPS growth is, which is something

you're not getting with OpenAI because

we don't actually have earnings per

share for OpenAI. Well, we know they're

spending every single dollar of this uh

just trying to grow the business or

advertise the business or build out

capex or whatever. And so if we look at

a PEG ratio, which we can't do for Urban

AI, but we could do for Palanteer, we

could take the current share price of

163 divided by 65. We're trading for

about 250 times. That's not necessarily

bad. It just means you have to divide it

into growth to see what the multiple is.

For a company like Palanteer, you should

really see it somewhere around a 2.7

multiple. Uh and so what we have for

growth over the next four years is 32.2,

35.66,

uh 41.58,

and 38.53. Those are percentages. So

divided by four years. Oops, I made a

little mistake there. Keep in mind that

these numbers are Wall Street estimates,

so I'll give you my estimates uh in just

a moment as well. Divide that by four.

There we go. And it works out to about

37 times. I'd argue they could probably

be closer to 40 to 50%. But let's run

that for a moment. So if we take 250

divided by 37, they're trading for a PEG

ratio of about 6.7.

And if we take my estimate, they're

trading for a PEG ratio of about five.

So in my scenario, they're probably

twice as valued as they should be. They

should probably be closer to eight. Uh,

and if you take the Wall Street

estimates of growth, they should

probably be closer to, let's go, 37

times the EPS,

uh, probably closer 2.67,

about $64. So, Wall Street on a fair

value peg basis puts them at about 64.

Zron puts them at about 40. Kevin puts

them at about 80 bucks on sort of a fair

value, right?

The issue though with Palunteer is not

that the fair value matters though right

now. It's actually that people are

looking at Palunteer as a longterm

opportunity to actually benefit and and

capture capital from the AI revolution.

And I think that's potentially what's

expanding some of the multiples here.

See, OpenAI has got this phenomenal TAM

because you can really address like I

mean you could sell this product to

everyone, right? Which is great. Like

everybody can have a GPT product until

of course they get unemployed and you

know they can't afford it anymore and

they just use the free version which is

a real risk factor. Open AAI, they talk

about seamlessly converting free users

to paid users, whereas Citron says

Palanteer relies on large long-term

government contracts and competes in the

enterprise space with lumpy, less

scalable revenue. This is somewhat true

because Palanteer's engineers with their

AI boot camps work to essentially set up

companies on their platform and then of

course the product becomes very sticky.

I'm not entirely sure how sticky an

OpenAI product is. So honestly, in terms

of stickiness, I kind of give Palunteer

a little bit more stickiness. Actually,

potentially a lot more because if

there's a better like if Grock is better

than OpenAI, why am I going to pay for

OpenAI? I'll just cancel the

subscription. I'll just use these free

models. In fact, I think there's an

argument to be made that at some point

in the future, a lot of the OpenAI, the

Gros, the C-Pilots, the Meta AI, they're

all just going to be like a free service

just like Wikipedia. and the companies

are really going to subsidize you using

it because they want you to use their

product so they can mine and harvest

your data. A company like Palanteer

doesn't in my opinion have that

replacement risk because they built out

their system essentially inside of the

very companies that they sell to which I

think gives them massive staying power.

Now, Citron recognizes this as well. And

so then they talk about, well, you know,

you have competitors like Microsoft and

Data Bricks. And Data Bricks, in

fairness, they've got great options as

well. Uh Data Bricks is is uh you know,

a fantastic product where you could use

a cloud system to help you set up

various different uh machine learning

systems which you can then combine with

LLMs to not only chat with the LLMs to

extract data from, but also to refine

your data and your waitings and

otherwise. And it's all cloud-based, you

know, they don't really have any on-prem

solutions. It's probably easier for

companies to get started with a public

company like public data bricks, you

know, and Palanteer's got like 800

customers. So, so they're not like as

big in terms of a reach as uh as data

bricks, but maybe that's a good

strategy. You know, people like this

idea about how well Palanteer is

integrating. And so, Citron, this is

where I disagree with them. They say

that Palanteer faces stiff competition.

I'm actually not sure that they face a

lot of competition and uh you know

commercial growth at Palanteer is is

growing faster now than government

growth rates at Palunteer which is

really bullish for Palanteer. Even

Citron says that Palanteer stickiness is

real. So even at a bear who's now

shorting Palunteer uh talking about

diminishing returns, they recognize that

Palanteer is a really sticky situ.

And I don't actually think they give a

fair shake to Palanteer in terms of how

integrated they are relative to some of

these these other companies. And so

that's instead where, you know, they

come out and argue, oh well, hey, you

know, here's a company that should be

trading for $40 a share. uh you know

again taking 17 times uh 5.6 gets you

about 95 billion divided by shares

outstanding right that's how they're

getting to uh the the 40 uh because if

you divide by about 2.4 four billion

shares outstanding, you get to roughly

$40 a share. That's roughly how they do

the math, right? But, you know, I feel

like their argument is somewhat weak

because they even have to get into

talking about insider selling, which I

mean, no surprise, when a stock runs up,

insiders are going to sell. I think

insider selling is typically a bad

indicator of stock future performance,

whereas insider buying is usually a

really good indicator of insider

performance. So while I think Citron has

a point that yes, the valuation is

stretched for Palanteer, it I I don't

think it's fair to compare Palanteer to

the likes of OpenAI just because the

stickiness here is massive, which is

great for Palanteer. Whereas the

stickiness at OpenAI is very very low. I

think OpenAI somewhat risks a here

today, gone tomorrow phenomenon where

like they're such a gem today, everybody

wants them today. you know, they're have

the first mover advantage, but as we get

better products at lower prices or even

similar products at lower prices,

OpenAI's stickiness to get people to

continue to fork over 20 bucks a month

or 200 bucks a month or whatever will

fade because there will be other options

that are good enough. And frankly, like

myself as one of them, I used to pay for

the $200 subscription to GPT. And I

would get just as much hallucination in

the $200 monthly subscription as the

free version. So now I personally prefer

to just use rock and cross check it to

the free version of like a claude or GPT

and I just don't pay because I kind of

feel like we're starting to commoditize

and the extra like the extra you're

getting for paying for these services

isn't really worth it. And I see my own

lack of stickiness for these products as

as a red flag for the broader market

because I and I'm not trying to say that

I'm early. You know, my wife tells me

I'm early all the time, but you know,

that's also probably a topic for my only

fans. I mean, my meet Kevin only. Okay,

I'm just gonna move on. Um, you know,

you really have uh a Palunteer product

where I know there are companies that

would love to work with Palunteer, but

they can't even get a call back from

Palunteer because there's so much demand

for companies to go to Palunteer. you

can't even get a call back from them

because Palunteer has a limited number

of engineers that that will set up these

products. And so it's sort of like

you're on this waiting list to get in

for this product. So I think Palunteer

is is kind of in the land of its own.

And uh it's a really impressive company.

In fact, back when this was 20 bucks a

share, I was one of the few people on

YouTube, you could go back and watch the

videos saying Palunteer is real AI.

That was when back when we were like

questioning like, "Oh, there are so many

companies that aren't actually offering

real AI products." Well, Palanteer is a

real AI. It's as real as it gets because

they really were a big data company that

just sort of rebranded as an AI company,

but that really is what we wanted

anyway. So, it doesn't really matter

that they rebranded. It was smart that

they rebranded, but I mean that's Palier

has always been the big data play. So,

you know, some something to pay

attention to. uh but uh yeah that that

really uh that puts us in in you know

position where yeah there's a sell-off

now be in part because you have you know

a Citron researcher who's uh you know

shorting and doing well on the short

right now but you also have a lot of

fear going on in the market broadly

which I think creates a a shorterterm

potential buying opportunity because of

you know the odds that Powell is

probably going to hawk to us and might

even set up for an interest rate hike

which would be very unal

Uh, of course, the good news out of all

of this is you can still uh get a tax

write off or check with your CPA for

signing up for the Meet Kevin

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check it out over at bkevin.com. Look

forward to seeing you a part.

>> 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

and YouTuber. Meet Kevin. Always great

to get your take.