Motley Fool Money – Episode: Palantir’s Valuation Question | May 6, 2025

Hosted by Dylan Lewis, Ricky Mulvey, and Mary Long

Introduction

In this episode of Motley Fool Money, hosts Ricky Mulvey and Sandmeet Dea delve into the latest earnings reports of prominent tech companies, with a spotlight on Palantir Technologies. They analyze the company's impressive revenue growth, scrutinize its lofty valuation, and explore potential challenges and opportunities ahead. Additionally, the hosts discuss developments at Celsius and DoorDash, providing investors with comprehensive insights into these evolving businesses.

Palantir's Impressive Growth and Valuation Concerns

Earnings Breakdown

Ricky Mulvey opens the discussion by highlighting Palantir's significant revenue and net income growth. "Total revenue up almost 40% year on year. Majority of that growth coming from the United States. Net income up 24%" ([00:26]). The conversation underscores Palantir's dual narrative: its robust business operations and the extraordinary expectations priced into its stock.

Business Performance

Sandmeet Dea expresses optimism about Palantir’s fundamentals, emphasizing the company's strong cash flow generation. “Their cash from operations were $310 million, representing a 35% margin. Adjusted free cash flow is $370 million, representing a 42% free cash flow margin” ([01:30]). This, she notes, showcases the company's solid financial health despite its high valuation multiples.

International Challenges

The discussion shifts to Palantir's international commercial revenue, which saw a 5% decline. Ricky references CEO Alex Karp's remarks on Europe's slower adoption of AI: “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” ([01:53]). Sandmeet reassures that while Europe currently constitutes a smaller portion of Palantir’s business, it remains a potential growth area. “Europe is not a huge portion of their business now... It could be a big opportunity for them for sure” ([02:20]).

Valuation Analysis

Ricky discusses Palantir's staggering valuation, noting it trades at approximately 600 times trailing earnings ([00:26]). He questions whether the market's high expectations are justified, comparing Palantir to other high-growth tech firms like Nvidia. “This is a software company that trades at more than 90 times sales... it's the most expensive company in the Nasdaq” ([03:03]). Sandmeet acknowledges the challenges of such a high valuation but points to Palantir’s potential to become a foundational player in AI. “The market is expecting over the next few years... revenue growth of 31% plus and EPS growth north of 70%” ([04:27]).

Investor Sentiment and Future Outlook

Sandmeet highlights that despite the high valuation, Palantir’s fundamentals remain strong. “71% US commercial revenue growth... they're gaining more commercial customers” ([04:27]). However, she cautions that the valuation demands a sustained and robust growth trajectory, which could be risky for value investors.

Celsius Holdings: Struggling to Sustain Growth

Earnings Performance

Transitioning to Celsius, Ricky notes the company’s mixed earnings results. “International sales up more than 40%. But this former growth darling is posting overall sales declines. Sales declines in North America. Earnings per share almost cut in half from the prior year” ([06:06]). The discussion reflects concerns over Celsius’s ability to maintain its growth momentum in its key markets.

Challenges and Strategic Moves

Sandmeet attributes Celsius’s performance issues to heavy discounting and unresolved distribution problems with PepsiCo. “They're having to use promos to sell... Pepsi Overstocking, what's going on with that?” ([07:10]). Additionally, increased SG&A costs amid declining revenues have squeezed earnings, prompting disappointment despite her personal affinity for the brand.

Opportunities and Acquisitions

Despite current struggles, Sandmeet points to potential recovery through strategic acquisitions. “Alani New acquisition was a good acquisition in terms of owning another brand... combined they have a 16.2% dollar share in the energy drink market” ([08:39]). She remains cautiously optimistic, noting that broadened brand portfolios and international growth could stabilize and drive future performance.

Future Prospects

Ricky questions whether Celsius should pivot to a more mature, stable business model, suggesting dividends or stock buybacks. Sandmeet counters that it’s premature to label Celsius as a mature company, emphasizing the need to focus on growth initiatives post-acquisition. “They’re working really hard to turn around their Celsius core brand... they still have a lot more growth ahead” ([12:03]).

DoorDash: Expanding Through Acquisitions

Strong Business Metrics

Ricky highlights DoorDash’s continued growth, noting a 20% increase in both orders and revenues. He observes that DoorDash has managed to establish itself as a resilient player beyond the pandemic surge: “The convenience and the reliability of DoorDash has stuck and more and more people are using it” ([12:33]).

Strategic Acquisitions

The conversation shifts to DoorDash’s recent acquisitions, totaling approximately $5 billion. Ricky mentions the purchase of Deliveroo for about $4 billion and the restaurant reservation service 7Rooms for $1.2 billion. Sandmeet discusses the strategic rationale behind Deliveroo, aiming to compete aggressively with Uber Eats by expanding geographic reach and enhancing local expertise. “They’re really taking an aggressive push to scale and compete hard with the likes of Uber Eats” ([15:32]).

Evaluating the 7Rooms Acquisition

However, the acquisition of 7Rooms raises questions about strategic alignment and valuation. Sandmeet expresses skepticism, noting that it seems less essential compared to Deliveroo. “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” ([15:32]).

Future Outlook

Overall, DoorDash appears poised for growth through strategic expansion and increased market penetration, despite some concerns over the necessity and impact of certain acquisitions.

Conclusion

In this episode, Motley Fool Money provides a thorough analysis of Palantir’s impressive yet highly valued position in the AI sector, scrutinizes Celsius’s mixed performance and strategic directions, and examines DoorDash’s expansion efforts through significant acquisitions. The hosts offer balanced perspectives, highlighting both opportunities and risks, providing investors with valuable insights to navigate these dynamic companies.

Notable Quotes:

• Ricky Mulvey ([00:25]): "Palantir, this is the company offering artificial intelligence platforms to the US Federal government and private enterprises."
• Sandmeet Dea ([01:30]): “Their cash from operations were $310 million, representing a 35% margin.”
• Ricky Mulvey ([03:03]): “This is the software version of Nvidia and it is going to places that are just unfathomable to any value investor.”
• Sandmeet Dea ([04:27]): “71% US commercial revenue growth, that’s huge.”
• Sandmeet Dea ([08:39]): “Combined they have a 16.2% dollar share in the energy drink market.”
• Sandmeet Dea ([15:32]): “I think the Deliveroo acquisition makes strategic sense, but the 7Rooms acquisition is less clear.”

Disclaimer

The information presented in this summary is for informational purposes only and does not constitute investment advice. Always conduct your own research or consult with a financial advisor before making investment decisions.