Palantirs Crashout

Good morning LPs,

Today I had the pleasure of writing about one of my favorite topics: massively overvalued tech companies. So if I randomly drown in a 2-inch puddle sometime in the next month, just know that it was because of today’s newsletter (and Peter Thiel is responsible).

Anyway, let’s get into today’s newsletter.

Hard and Fast News

fake headlines, real news

Trump vows to ban mail-in ballots and voting machines. “Never again will I allow my name to be put on a list with other rich and famous people.”(Politico)

Jamie Dimon and Zohran Mamdani had a surprisingly positive phone call after they realized they used the same offshore accountant. “We might differ on a thing or two, but at the end of the day we’re both rich and just enjoying life,” said Mamdani in a campaign speech. (Gothamist)

Trump to meet with Zelenskyy following Alaskan summit with Putin. “Zelenskyy isn’t on my side right now, but that could change if he sent 10,000 blonde-haired, blue-eyed Ukrainian women to Mar-a-Lago,” said Trump (Washington Post)

In response to the U.S. deploying Naval forces to Latin American waters, Venezuela mobilized 4.5 million militia men who are “hoping to be taken back to America as prisoners of war”. (CNN)

Soho House goes private after IPOing in 2021. CEO says, “We don’t want poor people buying our shares, entering our club, or even just near us in general”. (Morning Brew)

Palantir is Crashing Out

Last week, The Economist published an article claiming that the Peter Thiel founded defense tech startup, Palantir, might be the most overvalued stock of all time. 

I feel vindicated. For almost a year, I have said that Palantir’s hype and valuation are a collective hallucination perpetuated by tech bros. 

Up until recently, VCs and tech bros have claimed that Palantir is an incredible investment and represents the future of the tech industry. 

But even though I failed 6th-grade algebra, the math has never made sense to me. 

Let’s break down the numbers. 

In 2024, Palantir grossed $2.86B and is projected to do $3.9B in 2025 with a net profit margin of 32% last quarter. Considering their net profit margin in 2024 was 16% this is incredible growth. 

That being said, this is where the good news stops. Despite dropping 16% in the last 5 days, Palantir’s market cap is still $362 billion. Assuming they do $3.9B in revenue this year, that means they’re trading at 93x gross revenue and likely ~300x net profit. 

These revenue multiples make less sense than my drunk girlfriend trying to tell me a story at 3 am.

Before any midwit tech bros get mad at me, let me put things into perspective. 

Amazon has a market cap of $2.4 trillion and trades at 3.75x gross revenue. Another way to look at this is that it takes Amazon 50 hours to make more money than Palantir does in a year, but Amazon is only worth 6.7x more. 

Now I know there are a lot of dorks angrily reading this, thinking, “WELL you have to take into account increasing profit margin and rapid momentum when valuing a stock”. I know genius, but it’s still retarded.

Ok. So let's assume you’re right, and Palantir keeps growing. At a rate of 35% YOY revenue growth for the next 10 years. What would that look like? By my math, they’d be going from $3.9B to $78B. That's amazing. But guess what, that’s still 9x less revenue than what Amazon makes NOW. 

I’m not even trying to pick on Palantir specifically. In 2021, when Tesla hit a $1.1 trillion market cap, I was arguing with people that it was massively overvalued. But even then, Tesla was trading at 20x revenue, not 100x like Palantir. 

My point is that people massively overvalue tech stocks because of “future potential”. And while that is how you make money trading stocks, at a certain point, you can’t say that anymore.

It’s a safe bet that if you marry someone extremely hot at 25, they’re going to be an attractive 65-year-old. But it’s not a guarantee. Everyone reading this has seen a photo of their friend’s mom or dad at 18 and been like, “holy shit, what happened?”. 

That’s the thing, a lot can happen. Your spouse could get hit by a bus, start drinking heavily in their 30s, or hire Michael Jackson’s plastic surgeon. 

Just remember, the tech industry picks a stock to massively overvalue every couple of years. This is going to keep happening. Do yourself a favor and don’t get your stock picks from Twitter. Instead, do it the old-fashioned way and get a job working for Nancy Pelosi and start insider trading. 

If you refer 5 people to Jabroni Capital, I’ll write you an unhinged LinkedIn recommendation and feature it in the newsletter.

Memes

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Sometimes I wish I had studied comp sci.

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I am the captain now.

Song of the Day

Rock music has declined in popularity to its lowest point since the 1960s. So on that note, I thought I would share a new rock band that I’ve been listening to. This song by LEAP has been a recent favorite of mine. It kind of mixes angsty pop vocals with a metal-style guitar riff. If you’re sick of EDM and mumble rap, this is a good alternative.

Listen to the full Jabroni Capital playlist here.

Newsletter Feedback

I’d love your feedback on what sort of content you’d like to see or how you think I could improve :)

That’s all for this week folks.

Jack Kuveke (J.K.) | GP @ Jabroni Capital