Here’s the lead-in to Adam O’Dell’s latest ad for his Green Zone Fortunes (currently $49/yr or $199 for a “lifetime” sub, 12 month refund period)…

“He’s Made as much as 3,250,000% in just 3 Years on Companies like Facebook, Airbnb, and PayPal … But His Current Investment May Lead to His Biggest Payout Yet. See How You Can Invest Alongside Him (With a Starting Stake of Just $25).

“But You’ll Want to Do It Between Now and May 5th”

He even runs through a long rigamarole about this “eccentric billionaire” and the many hugely profitable investments he has made, and shows photos of him with what we used to call the “PayPal Mafia,” a group of folks who all worked at PayPal and went on to found or help build other important Silicon Valley companies like YouTube, LinkedIn Yelp, Facebook, Reddit and the like, and in many cases became well-known venture capital investors.

So really, we’re not dealing with top secret stuff here — the most famous guy from the PayPal mafia these days is obviously Elon Musk… but the guy who was really considered the “Don” of that “family” was Peter Thiel, who became a venture capital investor with a freakishly golden touch, and that’s who Adam O’Dell is talking about here.

Which means you might already know what this $25 “Tiny AI Company” is… but let’s check the clues, just to be sure…

This is how Adam sums it up on the order page:

“AI is predicted to surge 39,900% by 2030 … becoming more disruptive in the next ten years than any other technology over the previous 50 years.

“More disruptive than personal computers … the internet … and smartphones – combined.

“That’s because AI is not just going to disrupt one industry… or even two.

“It’s going to disrupt them all.

“Remember, Pete’s company is one of only three in the world to have a secret security clearance from the Department of Defense.

“It even protects our nuclear arsenal!

“And… beyond its government contracts, the company is now servicing some of the biggest companies in the U.S.

“Merck … Ferrari … Airbus … Pacific Gas & Electric … FAA … Cleveland Clinic … AT&T … 3M … and BP.

“What’s more, they are in talks with 300 other companies about implementing their new AI.

“In fact, demand for the technology is so unprecedented … ‘unlike anything we have seen in the past,’ according to a company spokesman.”

So… it’s only “tiny” in relation to the current Google, or to titans like Microsoft or NVIDIA, but this is the $50 billion “big data insights” software/AI firm Palantir (PLTR), which counts Peter Thiel among its founders (Thiel is currently the Chairman of the Board at Palantir, fellow co-founder Alex Karp serves as CEO and is really the face (and hair) of the company.

And what’s the urgency about “May 5?” That’s just three months after their last quarterly earnings report, so the guess is that PLTR will report their first quarter earnings around that date. Last year it was May 8, so it should be somewhere within a few days of that, but they haven’t confirmed yet.

Does that mean this next month is the only opportunity to buy Palantir shares?

Of course not. Companies that trade at more than 100X earnings don’t give you just one opportunity to buy — I’m quite sure that you’ll be able to buy Palantir at 100X earnings next year if you want to… and that might mean it’s above or below the current $23 share price, that all depends on whether investor enthusiasm remains high, but this is a story stock and it trades on enthusiasm and sentiment. The price will move around a lot.

Is the first quarter a particularly special one for Palantir? Most analysts don’t think so. The prediction is that their first quarter results will be very similar to last year’s fourth quarter, a bit over $600 million in revenue and eight cents in adjusted earnings per share (three cents in GAAP earnings). They have been steadily building their corporate business, and have spent the past couple years building their corporate customer base and reducing their reliance on the very profitable but slower-growing government contracting business (mostly data analysis for intelligence agencies and defense customers, though they do a lot of “big data” processing for other government agencies, too), so they might announce great contract awards or shockingly good earnings in early May… or they might announce that some big customers pulled back and the numbers are worse than expected.

Investors are expecting the revenue growth to stay quite steady in the 15-20% range, so anything outside of that would be surprising… and they’re expecting margins to slowly improve and bring more profitability, at least on an adjusted basis, but that translates into about 25% earnings growth, so anything far away from that number would also be a surprise, good or bad.

And we’ve seen Palantir teased quite a few times as an “AI” play, probably most assertively by Dylan Jovine over the last year or two, when he was touting their work in helping Ukraine with battlefield targeting, and I just wrote about the stock a couple weeks ago for a different teaser ad, with no real “new news” in the interim… so I’ll mostly just repeat what I said then:

This is a baffling company, frankly — my short description is that Palantir works with hundreds of government agencies and (mostly large) companies to provide software that mines, interprets and analyzes data to provide insights for decisionmaking. A lot of that is under the umbrella of AIP, their Artificial Intelligence Platform, but beyond that basic knowledge, well, I’d urge you to dance around in their website for a while to try to build some understanding, but you’re pretty much on your own. They do have a lot of case studies that provide examples of customer projects, and they clearly have a plan for turning what was a mysterious “big data” company that mostly worked with the government into the leading enterprise scale “AI” company. It seems like it’s working pretty well, going just by their ongoing success in onboarding large new customers.

How does the valuation look? Well, as you’d expect for a market that’s embracing AI as the world’s growth engine, it’s a bit challenging. Palantir is a $54 billion company these days, so it’s back to being as large as it was during the peak of 2021’s crazy market… but the good news is that the company has grown nicely during that time, roughly doubling revenues in the last three years, so it now trades at “only” 25X sales (it peaked well over 40X in early 2021). If analysts are on target with their estimates, then Palantir is going to post about 33 cents in adjusted earnings this year (14 cents in GAAP earnings — they still have a LOT of stock-based compensation, which they leave out of their adjusted earnings)… so by that measure, they are currently valued at about 74X forward adjusted earnings.

That means this is at least a little bit faith-based… you need to have some faith that growth will be strong in the future, and that eventually the scale of their larger cohort of corporate customers will mean that their margins improve at some point. Part of the challenge is that Palantir has widely been seen by analysts as a consulting company, partly because of their heavy reliance on government work, and consulting is a much lower-margin business than software (since a consultant can only work on one thing at a time, while essentially the same software can be used by 100 customers as easily as by one). So I think the idea behind picking the stock, for many investors, is that Palantir is going to grow into more of a software company, eventually earning higher margins and posting stronger cash flow and earnings.

Could be. The stickiness of their customers is impressive, their defense and intelligence customers around the world provide a pretty steady foundation while the growth mostly comes from corporate work, and they have plenty of cash on the books (so they shouldn’t be particularly fragile). It remains a mysterious company, and CEO Andrew Karp is a polarizing figure for some investors, and focuses a lot on the defense customers (he has been to Israel to help with their war against Hamas, as well as to Ukraine to provide tools for their defense against Russia), but he also does a great job of selling the story — I’d recommend starting with his latest shareholder letter if you want to get a sense of what’s happening at Palantir right now. They expect to have close to a billion dollars of adjusted free cash flow this year, so things are going well, I’d say the primary risk is that when you’re paying a high valuation, you have to expect extreme volatility if the news ever drifts even slightly negative — at more than 25X sales, 50X expected free cash flow, and 75X adjusted earnings there’s not a lot of room for disappointment.

But the same could be said of many popular growth stocks right now, I certainly own some companies that I think are too expensive to buy right now (The Trade Desk, Intuitive Surgical, NVIDIA, etc.), and Palantir is an interesting story, and you can at least imagine future growth which could let them easily grow into their current valuation. I came close to buying this stock a little over a year ago, when it got down to a pretty obviously reasonable valuation, but didn’t end up doing so, which means I’m probably “anchored” a bit too much on my decision not to buy when it was below 10X sales… but you don’t have to live with my psychological barriers, since I’m sure you’ve got your own to deal with, so you can just start from scratch: Do you think Palantir will be a leader in enterprise AI? Expect the strong growth in corporate customers to continue to grow cash flow? If you’re confident about those things, then the only thing that an elevated valuation means is that you’ll have to have an elevated amount of patience while the story unfolds, and you’ll have to take the risk that there could be big drops in the share price when the narrative shifts.

We’ve looked at well over 50 AI stocks that are being touted by various newsletters, and most of the popular stories among that group are trading on the same kinds of sentiment about future growth for artificial intelligence projects, and about almost endless corporate spending on AI initiatives. That could keep lifting the group, for sure, and there’s no end in sight for those narratives at the moment… just keep in mind that these story stocks also tend to trade together. If your portfolio gets too focused on one “story,” it might be a lot more volatile than you expect.

If you want to own a bunch of “AI” stocks, make sure you have a plan for what you’ll do if the narrative changes — sell if they hit a stop loss? Hold on if certain criteria are met? Buy more if you think the company continues to be well-positioned? Your plan will be personal, but have a plan — otherwise the most likely outcome, for almost all human beings in almost all market manias, is “buy high and sell low.”

I’m sure there are a bunch of Palantir shareholders (and probably detractors) out there in the great Gumshoe readership… so if you’ve got a reason why we should or shouldn’t put money into PLTR, please chime in with a comment below. Thanks for reading!

P.S. O’Dell is also peddling a company that he says has the “secret sauce” for semiconductor design tools, but is 1/20th the size of NVIDIA, with a “Special Report” called The One Company Perfectly Positioned to Win the AI Chip Race. That one is Synopsys (SNPS), which was also a “freebie” stock pick by Luke Lango back in November. That business, the software used in designing semiconductors, is essentially a duopoly, and the two players, Synopsys and Cadence Design Systems (CDNS), are extremely similar investments right now. Both are valued between $80-90 billion, growing revenue at 10-15% and earnings at 20-25%, valued at 40-50X forward (adjusted) earnings, so they’re arguably just about at the top end of a reasonable valuation range if that growth continues, which it might if chip demand remains high and custom chip design grows more popular. Every large company is trying to design its own ASICs or AI chipsets to reduce reliance on NVIDIA, so business is booming, but in the back of our minds we should remember just how wildly cyclical the semiconductor business has been over the past few decades. It does take some leap of faith to project that these companies, which were much more cheaply valued and had very slow growth for 15-20 years before things picked up in 2018-2019, are really going to see that sustained level of demand.

Again, I think part of your portfolio can be in growth stocks that are at least somewhat faith-based… that’s where the most extreme growth often comes from, and a few great growth stocks can really help a portfolio… but if you’re going to need that money in the next ten years, it can’t all be faith-based.

Disclosure: Of the companies mentioned above, I own shares of Google parent Alphabet, The Trade Desk, Intuitive Surgical and NVIDIA. I will not trade in any covered stock for at least three days after publication, per Stock Gumshoe’s trading rules.