View profile

Haircut 100 (Cestrian Stocks Bulletin #126)

Cestrian Stocks Bulletin
Haircut 100 (Cestrian Stocks Bulletin #126)
By Cestrian Capital Research, Inc • Issue #126 • View online
Consider this a Free Idea of the Week for all members, not just those who are paying us. You’re welcome.

DISCLAIMER: This note is intended for US recipients only and, in particular, is not directed at, nor intended to be relied upon by any UK recipients. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Cestrian Capital Research, Inc., its employees, agents or affiliates, including the author of this note, or related persons, may have a position in any stocks, security, or financial instrument referenced in this note. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note’s date of publication and are subject to change without notice. Companies referenced in this note or their employees or affiliates may be customers of Cestrian Capital Research, Inc. Cestrian Capital Research, Inc. values both its independence and transparency and does not believe that this presents a material potential conflict of interest or impacts the content of its research or publications.
$11.77 lol
All the same factors that helped Palantir ($PLTR) stock reach its positively Alpine crest in February 2021 have caused it to reach its miserable nadir today. Too much mystique, too much hype, too much hair on it. Literally.
Here is some stuff and nonsense talked about Palantir online.
“It’s full stack, they provide everything from the operating system up to the application layer”
“They can solve all data problems that any government or business has, just by running their AI over it”
“Alex Karp’s hair can save humanity from its own dark urges”
OK we made the last one up. But in essence - the ragtag army of social cheerleaders touting the benefits of Palantir’s software all across FinTwit since its direct listing has not helped the stock. The CEO has wisely used the period of stock price elevation to distribute a good deal of his holdings - a trait shared with all capital markets savvy CEOs, Musk and Bezos included - and that in and of itself has caused many a Tweetstorm. “How can you like this company?” screameth many. “The CEO is paid so much! It’s immoral! Stock based comp should be illegal!”. Translated: “I am very jealous that the CEO is paid so much and although I claim to believe in market economics wherein rare skills and high achievement pay more than just running an online comic exchange from my Mom’s basement, I don’t like it in practice because I am tee’d off living in the basement and I want a yacht. I need a yacht. I deserve a yacht. Wen yacht?”.
OK lookit. Forget all you ever knew about Palantir. Assume the CEO looks like a corporate soldier. Ignore the fact that the company pretends like all their employees are on a quasi-military, quasi-Middle Earth mission involving tortured Tolkien analogies. Ignore the toe-curlingly awful holier-than-thou shareholder communications. (Not all shareholder communications. Just the ones sent to Joe P. Retail, CEO of Basement Comixx, and his YOLOing buddies. Like this one the other day. This ‘shareholder letter’ had lots of words in it, but the clear message in the spaces between the words was, “we’re going to miss our numbers Thursday”. Which they did.).
Just imagine for a second that Palantir is simply an enterprise software company that sells boring stuff to boring customers.
Oh wait.
It is just a boring software company selling boring things to boring people.
This means … it’s in our wheelhouse now. Sorry, Joe P., we’ll take it from here.
$PLTR is now in our humble professional opinion a screaming Buy. That doesn’t mean the stock can’t plumb further depths in the coming days, doesn’t mean it’s suddenly going to moon, doesn’t mean the Wen Lambo moment is close at hand. But it does mean that the company financials are now running on rails, and it does mean that the stock is all beat up on both fundamental valuation and on technical parameters, and it does mean that as a result we have in staff personal accounts been adding to our long-term holdings in the name.
Let’s take a look at the numbers. (There are a few gaps in this table - that’s normal with a relatively recent IPO where you have to get a series of quarterly and annual reports before you can get all this historic data. None of the gaps are important and you can ignore them.)
Source: Company SEC filings,, Cestrian Analysis
Source: Company SEC filings,, Cestrian Analysis
Some highlights for you:
  • Revenue is growing at a TTM rate of 41% off a base of >$1bn/yr
  • TTM EBITDA margins are solid at 26%
  • TTM unlevered pre-tax FCF margins are also sound at 16%
  • The company has $2.3bn of net cash in the bank.
And as of today’s close - at $11.77 - the company is valued thus:
  • Market cap $11.77 x 2,005m shares o/s = $23.6bn
  • Net cash $2.5bn
  • Enterprise Value $21.1bn
  • EV = 13.7x TTM revenue / 59x TTM EBITDA/ 83x TTM UFCF
So the market is asking you to pay 13.7x TTM revenue for a company growing revenue at 41% with unlevered pretax FCF margins of 16% and a clean-as-a-whistle balance sheet touting $2.5bn Bullards.
In addition, and ignoring Joe P. and his Cult of Karp radicalized buddies, the company does have a unique position in the enterprise software marketplace. If you talk to users they’ll tell you the products can handle, parse, process and interpret large datasets rather well. And that those same products are relatively easy to use. We don’t see the moat ebbing away any time soon and we don’t see end customer demand reducing either. So we think Palantir is here to stay for some time yet.
In staff personal accounts we’ve been adding as the stock has weakened, including today following the strong earnings print. Yes it missed EPS. We don’t care about EPS, because it isn’t a thing. It’s just something auditors invented to save them doing the hard work on cashflow.
We’re bullish on the long term outcome for PLTR - very bullish - and we think the market will come around to our view. Best of all, you can decide to buy or not buy this now on the numbers alone, you don’t have to overthink it and don’t have to spend any time with Joe P. Retail or his growth bro Chad M. Loan (lives right across the street) to find out what the company does. 41% TTM revenue growth. 16% UFCF margins. 13.7x TTM revenue. Sentiment destroyed and FinTwit claiming to have never heard of the stock. That’s like a paroxysm of Buy signals all wrapped into one, right there.
Here concludes our Free Idea of the Week.
For more Ideas of the Week, if you’re not already a paying member here, sign up. It’s $9/month, less than you spent on Ethereum gas fees in the last thirty minutes. Just click here to join our Merrye Band Of Stock Loving Hobbitsss. Dammit Karp!
Cestrian Capital Research, Inc - 17 February 2022
DISCLOSURE: Cestrian Capital Research, Inc staff personal accounts hold long positions in $PLTR.
Did you enjoy this issue?
Become a member for $9 per month
Don’t miss out on the other issues by Cestrian Capital Research, Inc
Cestrian Capital Research, Inc

FREE STOCKS RESEARCH. Pro-grade work. Easy to read. Actionable ideas.

You can manage your subscription here.
If you were forwarded this newsletter and you like it, you can subscribe here.
Powered by Revue
5000 Birch St, West Tower, Ste 3000, Newport Beach, CA 92660