Did you ever go on a date? You came back and said wow. This is the best human being i've ever met. Perfection looks good, smart funny, no flaws. What happens six months later, you find out all the flaws.

The same thing is with companies in the stock market. There's no such thing as a perfect company. Every company has upside flaws, every company has downside opportunities, they all have strengths and weaknesses, and talent here is no different. Now what actually happened that, over the past few weeks, we saw an increase in the chatter around talenteer, because you know drama draws, these discussions as kathy wood is selling off the stock price is going into the toilet, dropping faster than my grandpa.

After the new year's party, everybody has something to say about palantir. Some of it is actually legitimate criticism. I want to progress and address in this video. I want to show you guys.

Some of it is complete nonsense and some of it is kind of on the fence in the middle, but in any case i want to present a balanced view in this video. I want to give you all these narratives bad narratives about the company and some numbers to show and confront that and you'd be surprised with some of them. I actually do agree, and so, if you want to hear like a balanced analysis of the problems with palantir, i guess stick around, because this is going to be interesting. So what are the biggest negative narratives? What are the biggest negative catalysts for palantir out there? Because you might have heard part or some of them, but i don't think you ever saw anybody confront these with actual numbers.

With some of these, i might actually agree. I'm going to surprise you. This isn't going to be a fanboy type of video, i'm actually going to give you the numbers. Some of these are legitimate, so the first thing is that the company is not profitable.

There's a lot of narrative from value investors basically saying well tom: this company is not making any money, they're, not profitable, you're just buying into the insane growth and that's true. There's growth. There 41 of revenue growth, so the growth is there nobody's arguing about the growth, but the value investor is basically saying well tom. This company is not profitable well, the reason is because they're looking at gaap profitability, valentine's gap loss for the quarter was 14, so they did negative 14 net operating margin on gaap basis, but the adjusted operating margin was 29 positive.

So why did we have such a big difference from adjusted operating margin of 29, which is really impressive and gap operating margin? Negative 14? Well, the reason is because the only difference, the only difference between adjusted operating margin and cap operating margin was stock, based compensation and obviously, stock based. Compensation is not a cash flow item. This is not being spent by the company, it does dilute the shareholders and we'll talk about that in a second. But it's not an expenditure for the company.

However, the internal revenue code, which is kind of where we get this whole thing from allows the company to take this as a deduction for tax purposes, to basically look at these options that were being granted to employees as a tax deduction. That's how you go from 30 to negative 14 for gaap, and what happens is that, even though you generated 424 million dollars, then what's going on? Is that you're actually getting an end oil net operating loss because you're getting credit and you're getting deductions on all these stock options, which you granted essentially you're, making money this year, not paying 21 tax and actually clearing forward a lot of these accumulated annuals operating losses? To next years, so it's a benefit, it's a tax benefit. So if that's the case, if the only difference between gap, profitability and actual profitability is just the stock based comp, then it's just a tax thing: there's no loans in the company zero debt. They have three times more assets than liabilities, they don't have any goodwill on assets and they just generated 424 million dollars in free cash flow from 1.5 billion in revenue, as far as volunteer not being profitable.

That's true for tax purposes, but it's just a tax benefit. In actuality, they just put 424 million dollars in the bank from operations. Now, let's talk about the second narrative, which is the dilution. So there's the big debate about planeteer's dilution, which was massive and the criticism is coming from a few angles.

Angle, number one is coming in from the point. Well, you know we're used to seeing dilution in companies that have you know it's a startup in startups. There's a lot of dilution. However, look this is a 17 year old company.

Why would we see so much delusion in a 17 year old company? Don't make no sense, and i agree that it's really unusual. In fact i've never seen this before volunteer in my life. However, if you look a little bit deeper into the company, you see why. The reason is that basically, palantir has two lines of businesses which i think should be actually separated.

I think it would be healthier for the company to spin off foundry and separate foundry and gotham into two separate companies, because on the one hand you have one late stage: company which is gotham the government business, which is kind of in the milk and cow stage. It's basically just you know getting revenue, not really growing that much. On the other hand, you have the commercial sector which is just taking off. I think it's year, five or six for foundry.

So a lot of employees are coming in into that business and need to be retained, and that's why potential is giving away a lot of stock based comp. When you give stock based comp to employees, you basically have a vesting period of four to five years, which the employee can't live without losing their options which are not yet vested. So it's kind of a prep for a war. That's coming against the big boys when the microsofts of the world decide to take on valentier, it's going to be very hard to retain employees unless you give them a chunk of the business and that's the theory behind it, but it's definitely deluding the other shareholders.

Make no mistake about it. The thing is and i'll be frank. They gave a big chunk of the business uh, not gon na lie, so they did 100 dilution. Two years ago, last year we had 14 dilution, so from 100 to 14 and in the last quarter of this year we had 2.5.

So basically, the annualized rate at the dilution right now is 10. That's coming down from 100 just two years ago, so basically they're slowing down the stock-based compensation, because they've hired the big chunk of employees. They need to keep going with foundry and i don't expect to see a lot of stock based comp. A little bit is fine.

Every company has it and nvidia even has it: every company has stock options for employees to buy. I think that palantir now is at the stage where it becomes at the same levels like in nvidia or in amd companies like this, where you know it's minimal. I think they're done with the big chunk. So if you hated this it's over, however, i don't hate this.

The reason being is because, if i think that you know let's say i have a law firm and in this law firm, we are two partners me and you and let's say we have a lawyer that we hired and he's rock star, but he's you know he's So talented he's getting offers to leave, we want to convince him to stay so we can offer him more money, but if scott and arps or sullivan and cromwell or some big law firm, you know offers them an obscene amount of money, we can't really compete. So what we can do is say: hey, listen instead of going to scott and arps stay with us here, we'll give you a third of the business now we're deluding ourselves instead of getting 50 of the profits. Now we're going to get 33 each, but if the superstar can increase the revenue, then we all get more money at the end of the day. Now the problem isn't the delusion here the problem and that's where i think a lot of the bears they missed.

The point the dilution is not the problem. The problem is: how certain are you that the choices of to whom to give these stock base comp is correct, because if this choice isn't done correctly, you just gave half of the company to bozos, and the question should not be well tom. Why are they deluding? The question is how we can get more assurances that the stock based comp was allocated to rock stars and superstars and not bozos, and, to be honest, we can't - and i have to agree with the criticism here. Although this side of christmas was never made, but i'm kind of agreeing with myself, not a first but i'll, tell you where i stand on this.

I agree with the criticism. However, i tend to think the things in the way that i i look, i think peter thiel and alex harp are good judges of character. So if i had to choose, i think it's more likely than not that peter thiel would allocate these options in the correct matter to rock stars with his experience and and track record in the business. But to be honest i don't know so it's an actual risk.

We don't know - and you know when you hire an employee and you give him a lot of money - you don't know how good is going to be until six or 12 months down the road until you see a whole year, so until you throw them in the Thick of it, you don't really know now. The next point is the company is expensive. Now look at volunteer right now. There are 13 price to sales.

Snowflake is moving between 1780 crowdstrike is at 30.. Cloudflare is at 45. I think. On the other hand, c3ai is at 9.3, so it's not the cheapest.

One, for example, like c3i, is cheaper, but it's definitely not up there with the more expensive players like a crowdstrike or a snowflake, or a cloudflare, 11 or 12 or 13. This company is actually a very good price point: not the cheapest one. I'm not going to sit here and say that 13 multiple price to sales is cheap, but compared to the similar companies. It doesn't seem to be that expensive.

Now about the other point. Here that's being made is that the government business is slowing down for the company. It is but check it out. The government growth started at 76 percent in the first quarter and ended on 26 declining throughout the year.

So, first of all, there's a lot of seasonality with government business government years usually start at the lower half of the year, and thank you alex from ticker symbol you for pointing it out to me, and so you see a lot of government activity and alex talked About this on the call on the lumpiness, you see a lot of lumps, so they come cyclical, becomes seasonal and that's okay. The other thing is that, honestly, even if it declines, it's not a huge deal, because the focus for me is the commercial side. I think the bigger total addressable market is in the commercial side and there we see a total growth of basically going from 19 28 35 47 quarter of a quarter and in that environment we're definitely seeing growth and i'm much more excited about the tam and opportunities In the commercial sector, so i'm not really that impressed by the claims of the government sector going down, even though they are the main revenue driver right now with like 60 revenues, but it's not the future of volunteers. So, however, on the commercial side there is a legitimate criticism - and i agree with it and most of the 47 growth from the government came from government.

But what about the commercial side so the commercial side we had about 34 growth. If you look in the us, you had 132 in the final quarter, that's insane, but that's just in the us! So if just in the us you had 132 quarter, how the hell did you have 34 on annual basis? That's because the rest of the world grew by 16, pretty much nothing so why? First of all, it happened on the self-imposed kind of basis. Palantir is putting resources on the u.s market right now, and you know they hired, i think 70 or 80 new employees. Over the past year.

They started the year with 12 employees and they finished with like 80, something employees on the u.s commercial sales side, so they're putting all their eggs on the us currently and that's one number two you have to understand, even though they have less resources to put on On rest of the world in europe - and there are self-imposed limitations because the government work they do. Valentia has a major problem: people hate them in the eu, they're viewed as a cia kind of company. Remember what ross gerber said on david's show they think of volunteer. Like this, as this, you know, government, evil, spy company and until volunteers solve this problem - and you know figures this out - they're going to have to deal with a lot of hate and a lot of pushback from european clients.

The only way to do it is just to attack the us, become an industry standard and then, when the u.s companies use palantir and they're kicking ass, basically the european companies will say: well, you know what they're going to make us so much money. I think they're not that bad, it's just business. You know money talks walks. The one point i want to make here before i let you guys go is what about the guidance they're guiding for lower operating margin for next year, instead of 29 adjusted operating margin, they're getting for 27., that's bad right, not really they're hiring a lot of sales! People a lot all over the world and that's gon na bite into their margins.

I think two percent basically is driven by that. So, assuming that the sales people actually do their job and generate much more income, much more revenue, then the reduced margin would not be a problem because at the end of the day the cash flow from operation is going to be much much bigger. But then again nobody really knows. I just wanted to give you kind of an objective picture about what's going on with this company.

Obviously, some of these concerns are real and you know it's a risky investment like any other, i'm as bullish on it, as i ever was. In fact, the q4 financials for me were a big sign that this is a company that really not easy to find 30 plus percent growth year over year 30 adjusted operating margin, sticky, business insane mode, great software, rich clients, cyclical business, uh, net retention in the us Was 150 net net retention on the government side was 140. I mean it's a really good business, not a lot of companies out there. That can give you something like that, probably like a google or a tesla and can't think of any others.

For that matter. I'm sure there are, but i mean there's not a lot of good companies like this. I know that the narrative right now is to hate on volunteer and that's okay. If you want to invest in different companies, i mean there's plenty of other stocks out there and i'm fine with it.

As long as you enjoyed the video i'm cool with it. Thank you so much see you tomorrow.