This video analyzes the latest earnings reports for Palantir, Brookfield Asset Management (BAM), PayPal, and Apple. Palantir shows strong revenue growth, particularly in its US commercial segment, but faces concerns over its high valuation and projected growth deceleration. Brookfield Asset Management reported record fee-related earnings and significant capital raised, though the speaker suggests its parent company, Brookfield Corporation (BN), currently offers better value. PayPal's earnings reveal stagnant top-line growth and declining transaction take rates, with expected returns primarily driven by substantial share buybacks despite a low valuation. Apple's report highlights slowing product revenue growth, with its services segment being the main growth driver, leading to questions about its high valuation relative to its overall growth.
Stock Earnings Review: Palantir, Brookfield Asset Management, PayPal, and Apple
0:00:27 Strong Q1 Performance: CEO highlights Rule of 40 score at 83%. US revenue soared 55% YoY, US commercial revenue up 71% YoY.
0:01:08 Overall Growth: Total revenue grew 39% YoY to $884 million. Customer count up 39% YoY.
0:01:20 Cash Flow: Cash from operations was $310 million (35% margin); adjusted free cash flow was $370 million (42% margin).
0:01:41 Q2 2025 Outlook: Revenue expected around $936 million (38% YoY growth), indicating a slight deceleration.
0:02:06 Full Year 2025 Guidance: Revenue guidance raised to ~$3.9 billion (35% YoY growth); adjusted free cash flow guidance raised to ~$1.7 billion. Further deceleration expected.
0:02:53 Balance Sheet: Phenomenal, with ~$5.4 billion in cash & marketable securities vs. $1.2 billion in total liabilities.
0:03:28 Cash Flow Details: Stock-based compensation $155 million. Operating cash flow grew massively to $310 million. Free cash flow $304 million in Q1.
0:04:01 US Commercial Revenue: Exploding, at $255 million in Q1, growing ~19% quarter-over-quarter.
0:04:49 Free Cash Flow Trend: Hit an all-time high of $1.32 billion TTM.
0:05:14 Valuation Concerns: Trading at a price-to-sales of 82 and price-to-free cash flow of 193. Speaker believes it's pricing in excessive future growth, requiring 50% annual FCF growth for a 10% stock CAGR.
0:07:22 Record Q1 Results: Fee-related earnings up 26% YoY. Raised $25 billion of capital in Q1, over $140 billion in the past year.
0:07:50 Real Estate Strength: $6 billion inflows into flagship real estate strategy, set to be largest ever.
0:08:18 Distributable Earnings: $654 million for Q1, $2.5 billion TTM. Increased 20% to $0.40 per share in Q1 (annualized ~$1.60/share).
0:08:50 Shareholder Letter Insights: Repurchased over 2 million shares in Q1, viewing market volatility as an opportunity.
0:10:05 Distributable Earnings Trend: Hit all-time high of ~$2.5 billion TTM, accelerating recently.
0:10:35 Assets Under Management (AUM): Reached ~$1.1 trillion, compounding at ~15% annually since 2020.
0:10:49 Valuation: Trading at ~34.4 times annualized earnings ($55.4 share price / $1.60 EPS). Speaker considers this high.
0:11:33 Value Indicator: Suggests BAM is attractive when dividend yield is ~4% (implying ~25x P/E). Current yield is ~3.18%.
0:12:02 Comparison to Brookfield Corporation (BN): Speaker believes BN is significantly cheaper. BN owns 73% of BAM, and its stake in BAM represents 80% of BN's market cap, yet BN has ~$52 billion of other assets valued at only ~$16 billion by the market.
0:16:30 Account Metrics: Active accounts +2% YoY. Monthly active accounts +2%. Transactions per active account -1%.
0:16:58 2025 Outlook: Transaction margin dollars to grow 4-5%. Non-GAAP EPS expected at ~$5 (6-10% growth). Expecting ~$6.5 billion in FCF.
0:17:22 Share Buybacks: Plans to buy back $6 billion of shares in 2025, which is expected to be the main driver of EPS growth.
0:18:13 Declining Transaction Take Rate: Consistently falling, from 2.27% (Q4 2019) to 1.68% (current), meaning PayPal makes less per transaction dollar.
0:19:02 Revenue Deceleration: Apparent since early 2024.
0:19:33 Free Cash Flow Stagnation: Expected FCF for 2025 ($6-7 billion) shows little growth from TTM.
0:19:52 Valuation: Market cap ~$66.5 billion, trading at ~10.2x expected FCF.
0:20:19 Speaker's Take: Low valuation is present, but growth is lacking. Returns mainly from buybacks (effectively a ~10% "dividend"). Not interested due to lack of business growth and declining take rates.
0:22:51 Services Growth: The only segment growing significantly (15% annually, $102 billion TTM revenue), and is the likely source of future growth.
0:23:13 Valuation Concerns: Trading at 30x free cash flow (3.3% FCF yield) despite low overall growth. Speaker views it as expensive, especially compared to PayPal which has faster revenue growth but a much lower multiple.
0:24:08 Speaker's Opinion: High-quality company, but price is too extended. Would only be interested if the share price fell dramatically.