Deep Dive
Shownotes Transcript
When you trade at 600 times trailing earnings, well, you got a high bar. You're listening to Motley Fool Money. I'm Ricky Mulvey, joined today by Samit Deya. Samit, thanks for being here. Good to see you. Hey, good seeing you, Ricky.
We've got some earnings to break down. The biggest story today is Palantir. And there are two stories with this company anytime you talk about it. One is the actual business. The second is the stock, because expectations for this company are absolutely incredible. Palantir, this is the company offering artificial intelligence platforms to the U.S. federal government and private enterprises. Some of its relationships with the federal government getting it into some controversial waters lately. Not that CEO Alex Karp really minds that
The other is the results. Let's talk about the results.
Total revenue up almost 40% year on year. Majority of that growth coming from the United States. Net income up 24%. That net income number not sounding like a number of a company trading. It's 600 times trailing earnings, but all right. And here is where some investors and traders have noticed a little bit of pessimism, and that is international commercial revenue, which declined 5% sand meat. When you were breaking down the earnings here, what did you see in the actual business results?
I actually liked it. I thought there was a ton of great growth here. One of the things I liked the most was that they just generated a bunch of cashflow. The cashflow operations were 310 million representing a 35% margin adjusted free cash was 370 million representing a 42% free cashflow margin. I mean, 42% free cashflow margin, but that's sinking a bit.
Alex Karp's commentary noting, as you said, Palantir is on fire right now. The rapid expansion of artificial intelligence. But when we looked at international markets,
That's where Europe is going through, quote, a very structural change and doesn't quite get AI. Maybe in the near future, we'll get AI, end quote. So let's talk about that European story. That's what investors are really responding to here. Do you think this is a hiccup or is it a real problem for Palantir's growth story? Yeah, so just for some context here, you know, 72% of Palantir's business in the United States was
with about 10% in the UK and the rest of it being in the rest of the world. So Europe is not a huge portion of their business now. It could be a big opportunity for them for sure. And so while it's concerning, I'm not, I'm not, I'm not too concerned about it right now. I mean, I've heard, I've also heard those rumblings of Europe, not getting AI Europe doesn't, I may offend some people here, but Europe main doesn't,
strike me as always being on the innovative side of technology. They've been a little behind. And so it could improve. They might jump on quickly. But when you think of AI, you think of the United States and China. As an ASML shareholder, count me offended, Sam Mead. All right, let's talk about valuation to the extent we can. Before earnings, this was a company trading at 600 times trailing earnings-ish.
Tough to tell when there's so much movement in the stock. But at the time I wrote this, Palantir's valuation was about 560X trailing earnings. Even though it's getting knocked down by the market, there is still a lot of growth priced into this company. And send me, this is a software company that trades at more than 90X sales.
So on that basis, it's the most expensive company in the NASDAQ with one exception. And that is the, now it's just called Strategy Inc. It's the artist formerly known as MicroStrategy. And now that's more of a Bitcoin holding company. Tough to make the comp there. So basically, the market is saying that Palantir does not have a lot of competition. It has a really strong moat for its artificial intelligence platform. And maybe just maybe this is the next coming of NVIDIA. This is the software version of NVIDIA.
NVIDIA, and it is going to places that are just unfathomable to any value investor. This is one I've struggled with. I mean, it's been on my watch list, but those numbers are pretty... That's a nosebleed valuation. Are you buying the story that the market is selling here?
This is by no means a value investor, darling. That's for sure. Over the next few years, the market is expecting revenue growth of 31% plus and EPS growth north of 70%. That's very lofty indeed. Very high expectations. One of the reasons the stock is down today is actually down much more than even when they opened.
How do you meet those expectations? What is enough when they report? I mean, their numbers, you look at them, forget the stock price, forget the valuation, just the fundamentals are strong. I mean, 71% U.S. commercial revenue growth. That's huge. And they're gaining more commercial customers, they're gaining more prominence.
in that area. There's a lot of people that believe that Palantir is just a government contractor-type software company, but they're expanding, and they're expanding fast, as you can see. So, difficult to purchase at these valuations for anyone that does not have the stomach to bear what will eventually be a correction in its price. I mean, we were talking about Cloudflare once, and they had hit, I think it was 100 times sales or something, and they flamed out.
The thing I see with Palantir versus some other very, very lofty valuations that this has the potential to be a company that will be a standard when it comes to AI, almost like an AI operating system of sorts for companies. Anecdotal evidence I've seen tells me that when people get into this software, they're keeping it and they're keeping it for a long time and they're using it and they're gaining a lot of value from it. So while it's tough with the valuation, that's really the only thing that holds me back from buying more of this thing.
Yeah. If you look at the call, there's customer examples. I think it was a Walgreens citing basically hundreds of billions of human decisions that are now going to Palantir's artificial intelligence platform that, you know, there's going to be a large scale commercialization of this, but
Man, there's got to be a lot of it for this valuation to make sense. Let's move on to Celsius. And this is one we enjoy talking about. I'm a shareholder. I know you're a shareholder. But this is one that I'm starting to put on a shorter leash, Sandmeet. International sales up more than 40%. But this former growth darling is posting overall sales declines.
Sales declines in North America. That's its biggest market. Earnings per share almost cut in half from the prior year. I remember, what was it, six months, a year ago, we were talking about inventory issues with PepsiCo coming in as a distributor. It's been a while, man. They've been in that relationship for a while. I don't know if we can keep blaming that. What is happening here with Celsius?
A lot of discounting. They're having to use promos to sell. The Pepsi issue is still an issue. Why it hasn't been resolved, why it's not Pepsi overstocking, what's going on with that?
Didn't really say too much even more on the quarter. In terms of earnings, they had SG&A costs that were up about 21% while their revenues were down 7% for the quarter. That's not the kind of math that you want for strong earnings growth. I was pretty disappointed by this quarter as well. I'm a huge fan of the company and the drink too, actually. But
They did point some tailwinds coming up when it comes to resets in their stocking, shelf resets, some new products, Alani New coming on the summer season. And kind of this is starting to be like more easy comps going forward. So they have cited the tailwinds are coming. And so let's see in the next couple of quarters if they're true to their word.
Maybe this goes against the health promise that it offers, but it needs a mixed drink. You've got the Red Bull vodka. I think you need a Celsius cocktail for the summer to get these sales going. But when you were digging through the business results, there's a lot of reasons to be pessimistic. You can tell me all you want that you're driving category share growth, but if you're losing money, that doesn't make me happy as an investor in your company. Any green shoots or anything stand out here that you think is worth talking about?
Yeah. I mean, like, look, like if you, if you think about it, a lot of new acquisition was, was, was a good acquisition in terms of owning now a, another brand in the portfolio, whether it's, it's masking the, the weakness in Celsius core brand is another thing, but combined they have a 16.2% dollar share in the energy market. So there's still a, a, like the number three, uh,
company in that market. So while some of the revenue growth has been weak, some of the sales and earnings have been weak, they're not going anywhere anytime soon. So
That gives me some comfort. And I think over time, they are looking to build out and broaden out a portfolio of brands. So I'd be interested to see how they kind of do that as well. And international is growing fast and growing well. And I think that could continue to perform.
the optimistic side of the Ilani New acquisition. Ilani New is a female-focused energy drink that they purchased last quarter. The positive spin is that this makes sense for their category. It's a healthy-ish energy drink that fits well within their portfolio of brands. The more pessimistic take is that here's a company struggling to find growth within its core product,
And now it is maybe overpaying for growth by acquiring another brand in order to become a growth story again. They've had a few months to settle out this Alani new acquisition. What needs to happen for this to be a good idea, a good buy for Celsius?
You know, Align New, they report retail sales growing about 88%. So I'd like to see them continue to grow. I mean, I've been noticing, maybe it's because of this acquisition, I've been noticing Align New a lot more in my social feeds and ads and whatnot. But it is a very, very popular brand. And I think...
buying the buying the company really stemmed the serious threat that they posed to Celsius. So I'd like to see more like synergies where it comes to, you know, will Alani news growth be able to help kind of bring that Celsius core brand growth up? Because while there is overlap with, with the demographics, there is still some differences and it could broaden out the distribution and the, um, the channel synergy. So I'd like to see some of that happening and the share growth to continue.
As we wrap up on this Celsius topic, if you have an open line of communication to CEO John Fieldley, he's still telling investors a growth story, but the results are showing maybe this is more of a mature company.
Do you think it's time for Celsius maybe to settle down into a more mature place? Start telling investors a cash cow story. Start paying a dividend. We're going to focus on buybacks if we think our stock is undervalued. Should it really be settling into life as a mature company, or has it still got a growth story left in it? I think it's a little early to call itself a cash cow story at this point. They
They definitely probably don't want to do that right after buying a very high growth brand in Alani New. So, you know, they're working really hard to turn around their Celsius core brand and get that going again. So while it could help in the short term, I think they still have a lot more growth ahead of it in terms of like that platform that they're developing and continue to pursue that.
We'll wrap up with DoorDash, which also reported swinging to a net income profit. But investors are responding to two acquisitions. We'll look at those in a sec. Right now, the business of DoorDash looking pretty strong. Orders and revenues up about 20% each. And when I look at this company, Sam, something that's interesting is this could very easily have become sort of a fallen angel from COVID, right?
And yet it's still continuing to see orders, revenue and profit rise. What's happening at DoorDash? Yeah. You know, it's a great point because, you know, DoorDash was heavily used during, during COVID and, but the habit is stuck. I mean, there's many of those fallen angels where the habit didn't stick. And I think of Peloton as the primary culprit there, but you know, the, the, the convenience and the, um,
The reliability of DoorDash has stuck and more and more people are using it. I mean, teenagers are using it. I have to stop my kids from getting on my phone and ordering cookies from DoorDash. So it's become a staple of our lives now.
The things that investors are responding to are these acquisitions. There's been two of them, totaling about $5 billion. You have Deliveroo, which is a delivery service in Europe and the Middle East. They're looking to purchase that for about $4 billion. Then a restaurant tech, restaurant reservation service called Seven Rooms.
for $1.2 billion. That one makes a little bit less sense. But what do you think of these acquisitions? The investment community seems to think, you've posted good results, you're swinging to a profit, you're building sales, but maybe you're bringing in some diversification with these companies.
With Deliveroo, they're expanding into their geographic region, getting nine new markets in the U.K., Europe, Middle East, Singapore. I think they're really trying to take on Uber Eats and Just Eat Takeaway. There were more before, but there are so many delivery apps. I think it's going to fall out to having a few.
Those few are going to be the ones that have scale. Those are the ones that have that customer stickiness, that habit that's formed by using them. Just from my own personal experience, I now tend to go to DoorDash more than I go to other apps or Uber Eats.
I don't go to some of the older ones or the other ones, one, because they're gone, and two, because I just don't see them as a place to go. So I think they're really taking an aggressive push to scale and compete hard with the likes of Uber Eats and others. And gaining that local expertise and becoming multi-category with delivering not just food,
but groceries and other things the seven rooms acquisition though yeah that that makes a little less sense to me you know some of that the the reason behind that is all right well now we can we can um you know help restaurants with not just delivery but managing on-premise and enhancing their commerce platform supporting their in restaurant operations sounds a little bit more like what toast is doing i don't know if they want to get into that i can see how there's some some
client or segments that they can get into with 7 Rooms, but do they really need to make a $1.2 billion acquisition to do that? I think that one is a little less reasonable, and I don't think that was necessary per se, but we'll see how it goes. We'll leave it there. Samy Deo, appreciate your time and your insight. Thanks for joining us on Motley Fool Money. Thanks, Ricky. Hey, Fools! We're taking a quick break for a word from our sponsor for today's episode.
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Up next, we're taking a look at scams. Cynthia Stewart is the executive director and founder of Dart, a nonprofit that uses gamification to help people recognize online scammers. She joined Robert Brokamp to discuss which scams are on the rise and how to protect yourself and loved ones from losing money.
What do people think of victims of scams? I think they often think of an older person who falls for something like a fake email or a text. Is it generally the case that senior citizens are more likely to fall prey to scams? Actually, no. The latest research shows that younger generations taken as a group are more vulnerable to scams. Millennials and Gen Z are the highest rates of victimization.
Older adults lose more money to scams than any other generation because they are more targeted and they have more to lose. So scammers are disproportionately targeting them because they have greater potential to get larger amounts of money from them. But they are not, in fact, more vulnerable than anyone else. That's a myth I like to debunk.
Let's talk about some of the biggest scams. What would you say are maybe three or so of the most common that you see? The FBI just put out this year's internet crime report. If you go by number of dollars lost, investment scams, and a lot of that is fake cryptocurrency investments, tech support scams, and romance scams would be your top three.
If you go by number of victims, phishing is always number one, and then tech support, and then extortion. Those investment scams I find particularly alarming because crypto ATMs are going in all over the world. I went and looked, and there are 12 within walking distance of my house.
which just makes it easier for people to fall for those scams. I think crypto is the new gift cards. People have learned not to buy gift cards, but now they can just send them to the crypto ATM and their money is just as gone and just as hard to recover.
One aspect of these scams is there's often a certain amount of emotion involved and a certain amount of urgency. It either makes you feel very good because someone is reaching out to you and saying, "Oh, you're so handsome, we should be friends." Or someone saying, "I'm your granddaughter and if I don't get some money soon, I'm going to lose my house." You either feel very good or very bad or very scared and
There's urgency to it. You need to act very quickly to prevent or get something.
Yes, those are two of the hallmarks, especially the emotion part. That is really the scammer's trick. They get you not to think. People will all the time tell me, oh, I'm too smart to be scammed. I know what to do. And they're not wrong. They probably do know what to do. But then I've heard hundreds of stories that end with, and then I hung up the phone, and then I thought,
And it's, they get you into feelings so that you don't think. And yes, it's either anytime anybody's trying to make you feel a strong emotion, that's the time to step back, take some time and think about it. If it really is a problem that if it's a real problem and money can fix it, you have time to check it out. So don't let anybody rush you by making you feel some sort of way.
I think a lot of people think, well, I would never fall prey to something from a stranger. But these days, people can impersonate people who are not strangers very quickly, often using AI to impersonate voices or just gathering information about you from social media, Facebook, TikTok, provide some information and think, okay, this really is my granddaughter or this really is my bank because they know so much about me.
It only takes three seconds of audio to produce a pretty good copy of a person's voice and make them say anything you want. So it can sound exactly like your favorite grandchild. And yeah,
It only takes small video clips now and completely publicly available software. You can make really realistic looking video calls now. So it is getting to the point where not only is hearing not believing, seeing is not. You just have to check everything out. One thing I am constantly advising people to do, and I will advise your listeners, if you take one thing from this, talk to your friends and family. Use this podcast as your reason why.
We need a plan. The next time there's some sort of a disaster or one of us is in trouble and we need help, how are we going to confirm that we are talking to the person we think we're talking to? If you have a plan, then scammers can't, you know, a code word or some way you're going to acknowledge each other. That stops scammers from being able to rip you off. And it means if you know if somebody's putting pressure on you,
that it's not the person you think it is because you already have the plan in place. If it really was your grandchild, they'd know what to say. In our family, our kids knew to use terms related to Star Wars as the code words. Yeah. So that's one very concrete step. What are some other concrete things people can do to protect themselves?
I think talking about it is a huge thing. Especially talk about it with the older adults in your life. They are particularly targeted. They're also particularly prone to being embarrassed if they fall victim to a scam or to feel like somehow they've done something wrong if they're even targeted. They're not. Scammers target everybody. Technology allows them to target thousands of people at a time.
But the embarrassment keeps them from talking about it. Fear that if they admit that they fell for something, they're going to lose their independence will keep them from talking about it. And isolation makes them more vulnerable. So let them know, hey, I almost fell for this scam the other day. Hey, have you seen that toll booth thing that's going around? Talk about it. Secrecy helps the scammers.
You're talking about older folks. Many of us have grandparents, parents getting up there in years. They may be struggling with some cognitive decline or something like that. How do
we help them stay on top of this? I say this because we all have stories of things that have happened to people we know. My father-in-law was basically participating in a fake lottery until my wife figured it out, cut off the source of funds, and they actually sent a taxi to his house
to try to get more money. It's pretty scary. Yeah, those are the ones that frighten me, when people know where you live. The level of maliciousness is just out of this world.
There are tools that can help like flag potential scam calls that can filter those out. Older adults may need help installing those sorts of things on their devices. So maybe offering to put those in. It's a delicate balance because people, you don't want to take away too much. You don't want to be condescending or take away their independence. On the other hand, you're trying to keep them safe.
Open communication, I think, is really the biggest tool. And making use of those tools, but letting them know what you're doing and why you're doing it. And so they know what that means if it comes, you know, suspected spam pops up. Or just talking about the techniques, what spoofing is. The fact that the caller ID is a number you recognize doesn't mean that it's the person it says. Right.
And then there's also a delicate balance of not scaring people so much that they then won't answer their phone at all. We've run into that as well. People need to know what they can do safely. You know, that it is always safe to look at your email. It is always safe to look at your text messages. That doesn't mean, you know, opening attachments. You know, where is the level where it becomes dangerous? Lots of important conversations to have with folks.
What are some of the things you should do once you realize you or someone you know has actually already fallen for a scam? Change your passwords right away. I recommend just change your passwords even if you think you didn't give that up because you're never sure how much they got that you don't realize you've given up. And report it. Report it to the FBI or the FTC. That's the Federal Trade Commission. They may not be able to get your money back. In fact, it's very probable they can't.
But what they are looking at, scammers are very organized now. It is international organized crime. And if they can see the patterns, you know, if they if you were if they made you got you to pay in crypto and you have the number of the crypto wallet you sent it to, if they can see, oh, hey, this is showing up again and again and again.
then they can build the case to put federal resources towards closing a ring down or working with international partners. So even if it doesn't, you don't think it will benefit you, it's still worth reporting.
As always, people on the program may have interests in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and are not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. The Motley Fool only picks products that we personally recommend to friends like you. I'm Ricky Mulvey. Thanks for listening. We'll be back tomorrow.