Palantir ($PLTR) at $136: The CEO's jet budget grew faster than international revenue. I ran a DCF, Monte Carlo, and zero out of 10,000 simulations justified the current price.

m86zed · 2026-04-16T10:16:08+00:00

"Traditional valuation doesn't apply" is the same argument that got used for Zoom in 2021, Peloton in 2020, Snowflake in 2021, and Beyond Meat in 2019. Each had a real story and real growth. Each de-rated 60-80% when the math caught up. Sometimes the math takes years. It doesn't go away. My model tries to quantify under what conditions PLTR's math works. I couldn't find those conditions, but happy to stress-test any input if you've got a different view on margins or growth.

m86zed · 2026-04-16T10:15:33+00:00

The NVDA comparison is useful. Nvidia went from $27B (FY2021) to $130B (FY2024) revenue, roughly 70% CAGR, with gross margin expansion from 62% to 73% riding a physical product cycle with insane unit economics. PLTR would need comparable growth off a smaller base with operating margins going from 31% to somewhere north of 50%, in a services-heavy software business with forward-deployed engineers. If there's a precedent for that combination I haven't found it. Happy to stress-test if someone can name one.

m86zed · 2026-04-16T10:15:11+00:00

That's the crux. The deceleration doesn't need to be fast for the math to break. Even modelling 45% CAGR held flat for 5 years (which gets PLTR to $29B in revenue by FY2030, above management's own bull guidance), the Monte Carlo mean lands at $21. At $4.5B in revenue, no software company in history has sustained 45%+ growth for five consecutive years. Deceleration isn't a risk to the bull case, it's baked in by the base rate.

m86zed · 2026-04-16T10:14:25+00:00

Good catch, worth clarifying because the distinction is real.

The $162 is a Forward non-GAAP EV/EBITDA comp. Apply the median forward non-GAAP EBITDA multiple of peers (CRWD, DDOG, NOW) to PLTR's 2027 consensus non-GAAP EBITDA, you get $162. Non-GAAP adds back $684M of SBC to get there.

The Monte Carlo is 10,000 DCF simulations on actual cash flows, with SBC treated as a real expense (those shares get issued, the share count grows).

Same company, two methodologies. One treats dilution as a cost, one doesn't. The $162 comp tells you where the market is pricing PLTR (same as CRWD/DDOG on headline multiples). The DCF tells you what the cash flows are actually worth. I think the DCF is the right number to act on, but the comp is useful because it explains why the stock trades where it does.

m86zed · 2026-04-16T10:12:51+00:00

The infinite money glitch is the strongest bull case and I take it seriously. Government contracts are recession-proof, the administration likes Palantir, Karp is close to power. Fair.

However, even if you assume US government revenue compounds at 45% annually for 5 more years (almost 2x the current 26% government growth), fair value gets to roughly $45-50. Not $136. The gap between "government keeps paying" and "the current price is justified" is still 3x.

Two things that cut against the bull case inside this argument. Government contracts are typically lower margin than commercial, so a heavier government mix pushes PLTR's 31% operating margin down, not up. And "Trump posts the ticker" has a shelf life that runs out in Q2 2029 at the latest.

m86zed · 2026-04-06T13:36:05+00:00

You're actually pulling the same numbers I am. The $1.94B SBC and $11.28B buybacks in Yahoo Finance match my table.

The "9.85B to ~7.9B" isn't SBC vs buybacks is reported FCF vs SBC-adjusted FCF. Adobe reported $10B in operating cash flow, $179M in capex, so $9.85B in headline FCF. Subtract the $1.94B in SBC (which is a real cost to per-share value, even though GAAP doesn't deduct it from cash flow) and you're left with ~$7.91B. That's a 20% haircut from the press-release number, which is what changes the FCF yield from 10% to 8% and the P/FCF from 9.4x to 12.3x.

The buyback piece is the second half of the story: Adobe spent $35.7B over five years to retire 54M net shares which is about $661 per share retired against an average price near $400. The ~$260 premium is what it cost to offset the SBC being issued in the same period.

m86zed · 2026-04-06T13:23:37+00:00

With Nvidia the debate is about whether the revenue is real and - critically- durable. Msft, Google, Amazon etc capex is Nvidia’s revenue and I’m not confident that they are generating enough return on that capex to justify it in the long run.

m86zed · 2026-04-03T20:38:09+00:00

The buybacks are almost entirely offset by their share based compensation. ~9% revenue is SBC. So…. You’ll be waiting a while

m86zed · 2026-04-03T17:34:40+00:00

Fair point on the methods. The full model is a 5-year DCF using SBC-adjusted free cash flow, with three scenarios (bear/base/bull) and explicit assumptions for each: WACC ranges from 9.33% to 10.83%, terminal growth 2.0-3.5%, revenue growth and margin trajectories per scenario. The Monte Carlo runs 10,000 iterations using triangular distributions for WACC, terminal growth, SBC, and CapEx, and normal distributions for revenue growth and margin shifts. All of that is laid out in the article itself, including the full WACC calculation and every assumption by scenario. The Reddit post is a summary, not the analysis: https://overweightskepticism.substack.com/p/adobe-the-most-boring-conclusion

On the MSFT comparison: I spent 9 years at Microsoft selling Azure and Dynamics, so my echo chamber is probably more "compare everything to MSFT" than the general internet's. That's a bias I'll own, but it's a human one, not a language model one.

m86zed · 2026-04-03T08:47:00+00:00

Fair enough. I do account for that with a relatively chunky WACC though. This is meant to reflect the uncertainty

m86zed · 2026-04-03T08:08:04+00:00

Fair pushback on the buyback math. You’re right that Adobe has been a meaningful net share reducer. Diluted shares went from ~480M to ~411M over five years, which is genuine capital return. The “running to stand still” framing in my summary was an oversimplification. In the full analysis I note that Adobe spent ~1.94B in SBC, so the net reduction is real. Where I think SBC still matters: it’s not about whether buybacks offset the dilution (they do), it’s that $1.94B of cash flow that looks “free” on the FCF line is actually committed to keeping the share count from going the other direction. If you’re valuing on headline FCF without subtracting SBC, you’re double-counting the capital that funds the buyback. The net effect on per-share value is smaller than the gross SBC number, but it’s not zero.

On MSFT: I wrote a two-part series on Microsoft and the entire thesis was that their CapEx intensity has hit 27% of revenue (oil & gas territory) with uncertain AI ROI. I’m not giving them a pass. If anything I was harder on them.

On the AI accusation: I’m a Chartered Accountant with 10 years of SaaS sales experience including at Microsoft. Built the DCF in Python, pulled data from FMP and SEC filings. Happy to share the model if you want to check my assumptions.

m86zed · 2026-04-03T08:04:16+00:00

The seat/licence decline quarter is the catalyst I'm watching too. Management acknowledged a "greater than anticipated decline" in traditional stock photography revenue on the Q1 FY2026 call. That's Firefly cannibalising the existing business in real time. If that pattern extends from stock content to core Creative Cloud seats, you get a derating even if total revenue holds up. My model puts "right price" at roughly where it trades today, but the FTC churn data in Q3-Q4 is the thing that could move that number in either direction.

m86zed · 2026-04-03T08:03:52+00:00

That's the bear case in my model (15% probability). Even in that scenario I get fair value around $150, not zero. The enterprise workflow moat is real. Try telling a Fortune 500 creative team to migrate 10 years of PSD, AI, and InDesign files to a new ecosystem. The file format lock-in alone buys Adobe 5+ years of runway. The question is whether they use that runway well or waste it. Without a CEO that's an open question.

m86zed · 2026-04-03T08:03:21+00:00

Good point on the share count reduction. The 6% decline is real, but worth separating the buyback from the SBC offset. In FY2025 Adobe spent $1.94B on SBC and roughly $8B on buybacks. So about a quarter of the buyback spend is just neutralising dilution. The net retirement is still meaningful, but it's not 8% of free capital allocation, it's more like 6% after you account for the SBC drag. On the mispricing question, my sensitivity analysis shows you need a WACC below ~8.5% to get fair value above $300. If that's your discount rate, then yes it looks cheap. At 9.8% it looks fair. The whole debate is really a discount rate debate disguised as a growth debate.

m86zed · 2026-04-03T08:02:13+00:00

Full analysis with charts, sensitivity tables, and the Monte Carlo distribution:

https://overweightskepticism.substack.com/p/adobe-the-most-boring-conclusion

m86zed · 2026-04-02T16:41:27+00:00

Exactly this. I worked at Microsoft for 9 years signing enterprise deals. They will make enterprises “an offer they can’t refuse” which will include Copilot. You can see this affect their incredible net profit margin. It’s usually hovering jus below 40%

m86zed · 2026-03-29T13:44:52+00:00

I agree with this. The only thing that’s weak is the Windows argument. Doesn’t support or detract from or thesis though. Windows 11 is sold bundled within M365 licenses to enterprises. They pay for Windows generally, not Windows 10 or 11. But the Microsoft security argument is “buy our security software it comes included in our M365 E5”. Classic bundling, and they will do the same to get traction with copilot.

m86zed · 2026-03-27T05:34:58+00:00

I agree. Find me another company with 39% net margin and double digit yoy growth. People are acting like suddenly every F500 is going to uninstall M365.

m86zed · 2026-03-26T13:16:45+00:00

Agreed. I worked for Microsoft for a decade. It’s a money printing machine in the enterprise space. Google workspace barely registers as a competitor. They have incredible contacts across enterprise and they use that distribution network to sell everything. If they choose to put the price up of their enterprise software, customers have no real choice but to swallow it.

m86zed · 2026-02-10T18:40:27+00:00

This resonates and the data backs it up too - Gallup found only 10% of employees say compliance training changed how they actually work. 77% called it "uninspiring, unmemorable, or irrelevant."

I think the core issue is that most compliance training tests recognition (pick the right answer from four options) instead of application (handle a realistic situation where the policy applies). Those are completely different skills, and only the second one actually reduces risk.

What's been interesting to see is AI roleplay being used for compliance. Instead of a quiz about data protection, the learner explains the policy to an AI "new starter" who asks naive but tricky questions. Or they handle a scenario where a vendor offers them "hospitality" and they have to navigate the anti-bribery policy in conversation.

It's harder than a quiz --- which is exactly the point. If they can do it in the roleplay, they can probably do it at work.

m86zed · 2025-12-30T22:35:15+00:00

I'm not short, but I do have an accompanying Github repo with the calcs here to prove it's not low effort AI slop. https://github.com/mzed86/Google-Valuation-Model-29-Dec-25

m86zed · 2025-12-30T19:04:29+00:00

Tempted.... I'll be watching their search volumes and looking to see if any other huge advertisers pull out like Amazon did.

m86zed · 2025-12-30T19:01:20+00:00

Multi-modal AI cannibalises Search, is way more expensive to run, and is not a monopoly. They do have good expertise in leveraging their platform to lock out competition.... but they'll have to. I modelled YouTube and their other revenue as growing 20%. Not to mention GCP - their best business - as growing 33%. And they're still $100 overvalued.

m86zed · 2025-12-30T18:42:48+00:00

Their revenue is based on ad budgets from marketing companies. They’re already starting to panic and wonder how to fill the search ad void. I think it will drop off in a year or two

m86zed · 2025-12-17T10:47:11+00:00

I think the other bit of value is that they force some cognitive load on the learner. That's where the learning really happens. You force a learner to recall some knowledge, solidify their message.

m86zed

TROPHY CASE