Palantir Stock is about to‼️😱

This right here, if I just had to show you one thing and one thing only from everything I had to show you in this video, this would be the thing right in front of your face. Right there, I would show you that before I showed you how much Palantir beat analyst expectations and my valuation models for the stock. This would be, if I could only show you one thing, this is it.

Okay, what I'm showing you there right now is a very famous thing. If you ever have valued more like SaaS-related type companies, right, which Palantir kind of gets put into the software as a service type business model, right? Even though they might differ a little bit, they get put in that category. So, when you're judging these sorts of business models, there's something called the Rule of 40 that's extremely important and everybody always looks at.

Basically, if you're over 40 when it comes to year-over-year revenue growth and then adding adjusted operating margin on top, if you're over 40, usually that's seen as like a very healthy SaaS-related number. The more you are over 40, the more special you are. So, let's say at 45%, 50%, 55%. Now people are looking like, "Oh my gosh, this company is very special! They got big revenue growth; they got great operating margins. This is a very healthy company."

If you ever go under 40%, people start to worry about you. The further you go under 40%, the more people are like, "Hey, this is not looking very good for this company."

Right? Palantir had a shocking 68% when it comes to the Rule of 40. This is ridiculous! There was a time period where people were a little concerned about Palantir because they were at exactly 40%, 42%, 38%, but then they've just been increasing at 46%, 54%, 57%, a shocking 64% last quarter. And people were like, "It can't go any better than that!" Then they put up a 68% number, and now people are like, "Could they be going Rule of 70? Is this company going to go 70% plus here in the next quarter?"

And it's a real potential. So, if I had nothing else I could show you in this video, that's it. You're dealing with a very special company when you're talking about these sorts of numbers. Ask anybody that's ever valued these sorts of SaaS companies, and they'll tell you this is ridiculous, that's special—special like the 1% of the 1% special.

Additionally, when you look at their income statement as a company, this is an A+ perfection income statement. Look at revenues: Revenues went to $725 million from $558 million. That was like a $167 million gain just on a year-over-year basis in a three-month span. That's insane!

Cost of revenue only went up $39 million roughly, so gross profit was up around $128 million year-over-year for this company. Sales and marketing, they kept that in check. Now, they increased all these spends, but the thing is their revenue was up $167 million. So, they had a lot of room to weigh up sales and marketing, R&D, and G&A if they wanted to, but they didn't really do it.

They spent more in all categories, but they kept the expenses in check in a major way, which just proves Alex Karp and the CFO of the company are really watching the expense profile of this company. They're really focused on not just growing for growth's sake; they're really focused on growing big revenues but also the margins of this company.

Income from operations grew to $113 million versus $39 million in the same quarter last year. Oh my gosh, the interest income continues to pour in for this company. This is a crazy number!

I really want everybody to understand how crazy this next number is. They had interest income of $52 million in a three-month span for basically just having their money in treasuries. How crazy is that? I mean, they're making over $15 million a month for just having money in treasuries! Imagine that—imagine having a life where you can make $15 million plus a month for just having your money in guaranteed treasuries. It's like crazy, crazy, right?

As far as other income expense, they had an $8.1 million kind of more one-off expense versus a $3.1 million gain there. So, that's over $10 million—it's like over $1 million of kind of difference there on a year-over-year basis, right? Which kind of hurts profitability, but their income from operations is so ridiculous it still makes their net income look insane.

Their net income went to $149 million this year versus $73 million in the same quarter last year, so they over-twox their net income. That's unbelievable! Did they even come close to 2x their revenues? No, their revenue was up 30%. So, when you can over 2x your bottom line and your top line is up 30%, that means essentially, you know, 70 cents plus of every dollar is heading down to that bottom line—that's special! That’s very, very special!

The new money coming in—so basically the way to think about this is for every little bit of extra revenue dollars Palantir has coming in, a lot of that dollar is making its way down to that net income line. That's incredible!

Look at the balance sheet; you want to talk about a fortress balance sheet, look no further than this! I mean, think this is what's crazy about Palantir here, and you're not going to find another company like this. How many companies have an A+ income statement, right? And additionally have an A+ balance sheet? How many? Not many!

I'm talking there's probably 20 or 30 companies in the entire public markets that have an A+ income statement and an A+ balance sheet. You are the 1% of the 1%! And to think this company just got in the S&P 500, and they're already one of the most special companies in the world—that's crazy!

Look at this: if you add up the cash and cash equivalents and marketable securities, they're well over $4.5 billion. That's incredible, right? Geez! If you look at total liabilities, total liabilities you add up all the liabilities on the balance sheet, they're less than $1.2 billion, and they got over $4.5 billion in cash and marketable securities—cash equivalents. Like that's ridiculous!

Total stockholder equity on this company is about $4.5 billion versus $3.4 billion at the beginning of this year. These numbers are historic!

Now look at this—ready to have your flapjacks flipped? Start looking at this: look at this 54% year-over-year growth in US commercial! US commercial business is booming for the company. Additionally, they had 133% quarter-over-quarter US commercial revenue growth. I mean, a lot of companies have trouble growing 133% on a year-over-year basis. They did 133% on a quarter-over-quarter basis. That's ridiculous!

Now, additionally, this is where you can get very excited about this company. They grew 77% year-over-year US commercial customer count. Now keep in mind their revenue was not up 77% or even close to that, right? It was up 54%. So, the way I would look at this is this essentially means there's likely bigger revenue growth acceleration probably coming in this company.

Like the revenue growth acceleration might not be done in regards to Palantir because at some point in time these two numbers are likely going to get much more in line with each other where this number has been far outstripping this number.

Okay, because when Palantir lands a customer, they don't always land like a big contract, right? Initially, sometimes they do, but a lot of times they won't, right? They have that relationship built there, then the company realizes how valuable Palantir can be for their business model, and maybe it can save them an extra $100 million every two years.

And so next thing you know, right, the company signs a $100 million contract with Palantir over a five-year span, right? Because they look at it and they're like, "Man, we can get a huge positive ROI on this if we go with Palantir."

Right? Additionally, look at this—73% year-over-year US commercial remaining deal value! Woo! That's an incredible number there.

Look at GAAP net income for this company. Generally accepted accounting principles, they're up to $143 million, right, from $71 million the same point last year. There—it’s a big milestone when you can get to nine figures of income, right? Not that many companies can do that. But when you start talking about multi-nine figures a year of GAAP net income, you're in a very special league, and they're going to be there!

We're talking; this is just each quarter. We're not talking about on an overall year; we're just talking about per three months. Oh my gosh, right? Special, special!

Now check this out here. Look at the operating income of this company—it went from $40 million at this time last year to $113 million! Jeez, like that's ridiculous! Almost 200% growth year-over-year!

No, two years ago the bears were saying Palantir, "Oh big deal! They're starting to make money on the bottom line, but you know what? They can only make money from treasury bills." And that was their argument at first. "They're only making money because of treasuries. If the Fed lowers rates and the treasury money goes away, they're not going to make any money."

Right? Well, Palantir showed them, "No, we're going to make operating income!" And they started making operating income. Then people were like, "Oh, it's only a small amount of operating income. They can never blow it up to a big number." This latest quarter, they did $113 million of operating income, and that's showing no signs of like going down.

They're going to continue to build that number significantly. At this point next year, we could be looking at this same quarter—we could be looking at $200 million to $300 million of operating income for Q3 2025—$200 million to $300 million of operating income! We could be looking at that point next year. Keep that in mind.

Now look at the Rule of 40, as I spoke about earlier. Year-over-year revenue growth plus adjusted operating margin: 68% for this company. Where's the top at? I don't know. I'm guessing it's somewhere around 70 to 72%. The top's probably coming soon in regards to this one, but who knows?

Maybe it's not—like what happens if they just keep growing this number steadily for like the next two or three years? That's a potential! What if next quarter is like 69%, then a 70%, 72%, 73%, 74%? Like, that's a potential as well. Don't rule it out!

Right now, US revenue growth is where the real strength is for this company—right? 44%. If you look at US commercial revenue growth, 54%. A lot of people were too bearish in regards to their numbers here. I'm talking analysts, I'm talking about a lot of retail investors as well.

A lot of people were too bearish with their numbers because they forgot that all the big government deals were coming through. Government had been lagging big time, but a lot of government deals came through over the summer, right? So that was going to add up to the revenue in this particular quarter, and sure enough, it did. And so, US government revenue ended up growing 40% year-over-year.

So that was a great number by Palantir! Commercial revenue growth, 27% overall. Now keep in mind US commercial revenue growth was 54%, so your brain should tell you something here—should say something's off. What is off?

International is insanely weak for the company—insanely weak for the company because the fact that they did commercial revenue growth at 27%, but the US was up 54%, that means international's lagging bad, bad, bad! Right?

Total revenue growth was 30% for the company, but yet if you look at US government, that was up 40%. Right? Look at US revenue growth. US revenue growth was up 44%, but the company's total revenue growth was only up 30%. So your brain should say something's wrong here—like what's going on?

International is insanely weak!

Now there's two ways you could look at this, right? One is you can just say, "Man, like Palantir is never going to be able to do good numbers in Europe! International is just insanely weak!" What is it with those Europeans? They don't care about technology, right?

You could look at it that way. I look at it a little bit differently. Europe will adopt these technologies! Europe will adopt Palantir here. You can resist it at first if you want, but you're going to start to understand Palantir is going to be a game-changer for your business model and for government agencies.

So it's just a matter of time before the European market and international in general start to pick up substantially and start helping Palantir substantially. Right?

Right now, the international business—just think of it as a massive headwind on the company. Like, oh my gosh! You're running up a hill and the wind's just coming against you, and you're like, "Oh my gosh, this is brutal!"

This is Palantir right now when it comes to international business. I don't think it's going to be like that forever. I think actually in 2025 and 2026, that headwind could actually start—to keep the key word is start to move to a tailwind. The European market is just slow, and that's why Europe does not have the top tech companies.

This is one of the key reasons why US companies end up running the world, right? Then Europe just tries to figure out how to regulate stuff. But you look at all the top real big tech companies—the ones that matter the most, the ones that have the hundreds of billions of dollar market cap or trillions of dollars—they're all US-based companies because the US moves fast with tech.

We adopt the technologies; we get it going. Europeans, they're a little slower in regards to getting this tech over, but they will get it. No different than they adopted every other technology over time.

Just that is something to keep in mind there: the European market and international in general will go from a massive headwind to a tailwind in future years, and that's going to help out growth rates substantially! That's still coming!

Okay, now here's the other part. If you look at total revenue excluding strategic commercial contracts—right? Kind of the SPA situation—revenue actually would have been up 32% in the quarter. This has been another major headwind. So we just spoke about international being a big headwind for the company. This whole SPA situation has also been a headwind on the company for really the past year or so because they kind of moved out of that space.

But this was something that’s been weighing against results, and it weighed against the results again, right? 32% would have been their revenue growth rate if it wasn't for this.

So this starts to become really a non-factor in 2025, which once again is going to be something that's going to help out Palantir's growth rates. So once again, this growth acceleration phase—quarter in and quarter out, people start thinking like it has to be over, like the growth acceleration; they can't do it anymore. This may not be done, folks! We might still be going higher with revenue growth rates!

We might go to 31%, 32%, 33%, 35%, 37%, maybe a 40% number. I'm not going to go that far, right? But the story is likely not over in regards to growth acceleration right now.

Additionally, here, check this out. We continue to invest aggressively in AIP and the US while driving operating leverage at scale. So they show their Q3 2024 adjusted operating income: $276 million, and that was a margin of 38%. Adjusted operating margin of 38%, which is shocking!

Once again, if we look at this quarter last year, 29% was adjusted operating margin, so they improved 900 basis points—900 basis points on just a year-over-year basis! You’ve got to be flipping my flapjacks!

Look at US commercial customer count here: 77% growth year-over-year! Customer count in general is up 39%; in commercial, customer count was up 51%.

Imagine when the European market actually starts rolling. Imagine that in the rest of the world, in general. Like holy smokers! That's going to be no dang jokers!

Right now, additionally check this out. They did 104 deals in the quarter that were at least $1 million deals. Once again, Palantir is working with the big money folks! They did 36 deals of at least $5 million, but the most shocking number of all of them, in my personal opinion, was that number—16—16 deals in the quarter they did which were at least $10 million! Incredible number!

Now, this is very important here. This is very, very important that cash flows to this company. So if you look at cash from operations, 58% margin—$420 million in the quarter—but adjusted free cash flow was at a 60% margin—$435 million of adjusted free cash flow in the quarter! What?

And that compares with this same quarter last year; they were at $141 million—oh my gosh! A 25% margin to a 60% margin when it comes to adjusted free cash flow! These numbers are startlingly good—it’s ridiculous!

Right? This is crazy! And we'll talk about in a moment what they're going to do with all this money because it's a lot of money, and it's not going to stop coming in anytime soon!

Right now, in terms of their guidance, they guided for $767 million to $771 million. Keep in mind they'll probably beat that number, probably. Now, I would not expect a huge beat, and the reason being is this quarter they're in now—this is October, November, December quarter—right? Holiday season.

You also have the election, and so a lot of companies are a little more on edge about doing a deal in this particular quarter. A lot of them will be much more happy to do deals in the first quarter of 2025—so Q1.

So I think they could potentially beat the numbers they put out there, but I'm not expecting a gargantuan beat like this past quarter was, where they blew analyst expectations because they did $726 million this past quarter—analysts were at about $703, so that’s a substantial beat—they beat by like $23 million!

Right? I'm not expecting that big of a beat. I think it's going to be a much smaller beat next quarter because of just kind of companies moving slow in the holiday season, right? People are on vacation, and you know the election and all that stuff has to happen, right?

Q1, people get back to work, and they start doing deals, and like, “Let's make this happen!” Right? So that’s just something to keep in mind there. But remember, they're at $744 million for this next quarter, and their midpoint guide is $769 million.

So basically, their midpoint—Palantir's midpoint—is $25 million ahead of where analysts were at on average. That is substantial! Adjusted income from operations—we're talking about a mid of $300 million. Like I said, the money is not going to stop pouring in; it's just going to get bigger and bigger!

Now here’s the thing. I had predictions. I put my predictions on X. I don't know if you guys follow me on X or not. If you want to follow me, I always keep that in the description area of all my videos. I keep my Instagram down there, and I also keep my X page if you're ever interested in following me on Instagram or X, right?

But I posted this on X here today. I said my prediction for Palantir earnings was that EPS comes in at 9 or 10 cents—analysts were at 9 cents. The company came in at 10 cents—right? I said revenue is going to come in $705 to $725 million—analysts were at $703. So I was much more—my midpoint was basically $715, so I was about $12 million ahead of where analysts were at, and they even beat my numbers.

They came in with $726 million, so even though I was bullish, they came in and even beat my bullish outcome, which is pretty dang impressive. Now, I said for the December quarter, I think the guidance is going to be $760 million to $800 million—analysts were at $744 million. So my midpoint was $780 million for the guide. The company came in and guided $769 million for their midpoint of the guide, right?

So about $11 million under my midpoint, but keep in mind they might still end up hitting my number—like they might still hit my number or get very close to it. Maybe they do a $777. Oh, that would be a good sign!

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So, Palantir—let's start off with Palantir, and then we'll go from there, okay? We'll do it in order. So, Palantir—couple important things to understand is clearly the earnings per share trend is up and up and up. They went from negative 1 cent to positive 1 cent to positive 4 cents, then 5 cents, 5 cents, positive 7 cents, then 8 cents, 8 cents, and then the latest quarter they did 9 cents of EPS!

Right? So there's clearly a trend of earnings per share building and building. It's going to be very important when we look at what's expected for this quarter and what's expected for next quarter from analysts, so we can kind of understand if this company is likely going to beat or miss.

Additionally, revenues have been building for several quarters now. We went from 12% revenue growth to 16% revenue growth to 19% to 20% to 27% revenue growth, so the revenue growth rate has been expanding and earnings per share has been expanding as well.

Now, additionally, here's what analysts are expecting: So analysts are expecting 9 cents for this. Keep in mind, there's not just—whenever a company goes to report earnings like Palantir is about to report their earnings, right? It's not just about what has the company done for this past quarter. That's important, but even more important is guidance.

So if the company gives any guidance about what they are thinking likely for earnings per share for the upcoming quarter, for revenue for the upcoming quarter—that honestly, a lot of times, matters even more than the previous quarter. So keep that in mind.

So analysts are at 9 cents EPS for not only this quarter they’re about to report but also for the upcoming quarter after that. Additionally, they're at a 26% revenue growth rate. So the analysts are expecting, on average, a deceleration in the growth rate, which would be a breaking trend because the trend has been for five quarters now in a row of just revenue growth rate getting higher and higher and higher.

This would be a reversal of that. Essentially, we'd be decelerating the growth rate right down to 26%. They're expecting $703 million of revenue. Keep in mind, Palantir has a business model that just keeps building on itself because it's more of a SaaS kind of type of company, right? So their revenue just builds pretty much quarter in and quarter out.

It's not like a retailer that might have a big one quarter and then a big fall-off the next quarter or something like that, right? So they did $678 million last quarter, right? And there was a build—there was a build there of about $44 million, right?

So then here they're only expecting a build of about $25 million, right? Because $678 plus $25 would be right about $703, right? So that’s important to understand that the expectations here for this current quarter are not that extreme, and then they’re expecting around a $41 million buildout in revenue for the following quarter.

But once again, another major deceleration in the revenue growth rate down to 22%. Okay, so the moral of the story is if you look at these numbers, I would say these numbers—and we'll speak about what I'm expecting here in just a moment—but if you just look at them, are they beatable? That’s the first thing I’d like to think about for any stock I hold: Are the numbers beatable?

If you look at these numbers, they're beatable—these are beatable numbers. The earnings per share they're expecting not only for this current quarter they're about to report but the future quarter—the same exact EPS as the previous quarter even though Palantir is not really adding a lot of cost to the business right now and their revenue is going to go up substantially.

Hmm. Very beatable earnings per share there! And then if we think about revenue, that looks very beatable as well, to be quite frank, right?

So what am I expecting? Here’s what I’m expecting: I'm expecting for this current quarter when it comes to earnings per share, I'm expecting roughly in line with what analysts have—potentially 10 cents of EPS, right? Now, for the upcoming quarter, that’s where I diverge quite a bit from analysts. Analysts are at 9 cents of EPS; I think that’s at the low end. They would do 10 cents for that quarter but potentially up to 12 cents of EPS in that December quarter, which is a pretty big, you know, kind of difference between where analysts are at versus where I'm at.

I'm looking, and I'm saying, “You know, the treasury money is going to continue to pour in, right? All the money they’re making in regards to all the T-bills they hold, that money is going to keep pouring in.”

Right? Additionally, the revenue continues to build out, and they’re not adding much cost to the business model. So I don't see any reason why they can't do a minimum of 10 cents in that December quarter with potential upside to 12 cents in that quarter, right?

So the earnings per share I think is in the bag as far as that potential there. Now as far as revenue goes for this quarter they're about to report, I'm expecting on the low end $705 million of revenue to potentially $725 million of revenue. That's versus analysts are at $703 here, so I think analysts are a little too in—on average that is, right?

I think analysts are a little too modest in regards to their revenue expectations here—the government deals are pouring in, the commercial deals continue to pour in, right? Additionally, a lot of these commercial deals and commercial clients they signed up for, you know, not much revenue here at the start are likely building out to be bigger and bigger contracts—those sorts of things.

So I think this number is a little lowball. Additionally, I think this next quarter is lowball as well. They’re at $744 million, and I think they’re probably going to be at $760 on the low end to potentially $800 million on the high end when it comes to revenue.

So I believe analysts are off on both of their expectations there. I think they’re just too low; they’re too modest in regards to their expectations there.

Right now, what's going to happen with the stock price?

Okay, so here’s what happens with the stock price, in my opinion. If the company comes through and they have the report for this past quarter, right? They report a 30% plus revenue growth number, and then additionally they guide out to a 30% plus revenue growth number again, I believe the stock's going $45 plus in that situation—$45 plus!

We’ll see—we’ll see a new all-time high on Palantir stock, maybe even the stock push to 50. But they got to have a 30% plus number for this past quarter and a 30% plus guide because if they could do that—if they could report a 30% and then guide out to a 30, then everybody would be convinced that this is once again a growth company that is at a 30% type clip, and people are going to flip their flapjacks over that!

Okay, now if the growth rate for this past quarter and this upcoming quarter are somewhere between that 25% to 29%, then I think the stock maybe downtrends a little bit, but not like fall off a cliff. I think $35 to $40 is what we're looking at by the end of the week—let's just call it that—if the growth rates are somewhere in there.

See, I think that would be a little bit of a letdown. Some people are kind of thinking like, “We’ve got to keep that growth rate.” But if we also saw deceleration, I think it would be a little bit disappointing, right?

So I think the stock would just kind of flounder; it wouldn't really do much—right? Maybe downtrend a little bit.

Now on the flip side, if we went under 25% growth rate for revenue—under 25%—so meaning 24% or below for either this quarter they’re about to report or next quarter, I think we crash big. And when I say big, I'm talking down to the low $30s—somewhere between $30 and $33. That would be a big crash; I'm pretty convinced of that because yeah, that would not be good, okay?

That would not be good. A lot of people’s expectations are much higher.

Now the important thing I need to tell everybody in regards to Palantir stock—I think this is very important; I mention this right now.

Okay, listen, with these sorts of companies, when you own what you believe is a game-changing company over the next 10 years—and if you really believe Palantir is going to be a $500 billion market cap, a $750 billion market cap, a trillion-dollar company 10, 15 years from now—right? Don’t get freaked out over the revenue growth rate, whether it comes in at 27% for this quarter, 26%, 29%, 31%.

If you believe this is going to be a $500 billion plus dollar market cap over the next 10 or 15 years, don’t get tripped out over the revenue growth rate in the short term because at the end of the day, whether they're growing 26% or 29% or 31% in the short term, it is what it is.

If you really believe this is a company that's going to be a company that starts throwing off billions of dollars a year in net income, okay?

So focus on the long term! Listen to the conference call, make sure the business is aligning where you need it to align. But a lot of people are going to be flipping out whether the revenue growth rate is just a few percentage higher or lower.

Don't be part of that bunch. Be part of the long-term bunch that you're either focused on like, "This is going to be the next, you know, massive tech company," or it's not. But don't let your judgment be clouded by if revenue percentage growth is a few percent up or down.

That's what I'm going to say about that, okay? Because there are going to be a lot of people that are going to do that, and those people might just look back long term and be like, "Dang, I kind of made a mistake in regards to that." Right? So keep that in mind.