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Reflections on Palantir

(nabeelqu.substack.com)
479 points freditup | 4 comments | 16 Oct 24 02:18 UTC | HN request time: 0.846s | source
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jgalt212 ◴[16 Oct 24 17:48 UTC] No.41861759[source]▶
246 PE, with a $94B market cap.

https://finance.yahoo.com/quote/PLTR/

Alex Karp has something figured out. The investor class loves him.

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jgalt212 ◴[16 Oct 24 17:55 UTC] No.41861807[source]▶
As best I can tell only ARM has a higher PE and Market Cap.

https://www.marketbeat.com/market-data/high-pe-stocks/

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airstrike ◴[16 Oct 24 18:25 UTC] No.41862118[source]▶
Those are trailing P/E numbers, so they are just plain wrong and should be disregarded.

Also P/E doesn't matter for companies that have not been profitable for long. Any PE number above 100x is very likely just noise. I wouldn't look at anything too far above 30x, maybe 40x to account for the craze behind NVDA today

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1. jgalt212 ◴[16 Oct 24 18:38 UTC] No.41862274[source]▶
Fine, but it is notable / extremely notable that there is only one large cap more expensive than Palantir on a PE basis. I'm not splitting hairs here, I'm talking about extreme outliers.
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2. airstrike ◴[16 Oct 24 19:34 UTC] No.41862948[source]▶
It isn't really notable because those PE multiples are literally just noise. There are many companies with negative PE on that list too, even though that makes no sense.

To take that even further, imagine ACME Corp.'s stock price is $1.00 today. You're a research analyst and built a very robust model based on your understanding of the company, the market in which it operates, corporate guidance, competitor performance, your experience, phone checks with the sales channel, etc. Your model currently says the company will have negative ($0.01) EPS over the next 12 months. Based on this information, its implied forward P/E multiple is -100.0x.

The next day, you come to work and update your model based on some new information like the Fed cutting rates by 25 bps or revised labor market assumptions, what have you, such that your expected next twelve months EPS is now positive $0.01. The implied trading multiple is now 100.0x.

Do you think a $0.02 change in the expected EPS should result in a 200.0x P/E difference? No, it shouldn't. The P/E ratio for a company with negative or near-zero earnings has no meaning.

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3. jgalt212 ◴[16 Oct 24 22:08 UTC] No.41864334[source]▶
> . The P/E ratio for a company with negative or near-zero earnings has no meaning.

Only true in a ZIRP world, which no longer exists. Companies have bills to pay, and if you're constantly bouncing around 0 PE gambler's ruin is not far ahead

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4. airstrike ◴[16 Oct 24 22:17 UTC] No.41864390{3}[source]▶
This is factually incorrect. Plenty of negative P/E companies in the market with positive implied equity value.

The least objectionable defense of my argument is that many such companies are choosing to reinvest so much of their cash flows into more growth because that creates higher NPV than the alternative. If they wanted to, they could be profitable, but they choose not to be in order to be MORE profitable in the future.

Also note EPS is an accounting metric, so it's just "theoretical" stuff. It's not cash flow. These companies in general have positive operating cash flow... including PLTR