Alex Karp's latest Palantir Interview on Valuation & Competition
Recently, Alex Karp was interviewed at the World Economic Forum in Davos, Switzerland. There he was interviewed by CNBC's Andrew Ross Sorkin.
The Following is what Alex Karp had to say in regards to Palantir's Stock performance.
Andrew Ross Sorkin:
“What's your view of the economy and the ramifications? And maybe it's a ramification of war.”
Alex Karp:
“No, I think the chief thing hurting the economy is we're in an unknown zone where things are happening we didn't plan. Wars, trying to deal with the wars, inflation. We're also highly divided inside of our countries in the west.
Andrew Ross Sorkin:
“What do you make of, you have a lot of corporate clients here, it's not just governments. The feeling from them, their ability to buy or spend more or not right now?
Alex Karp:
“Well they're gonna just like in a war situation, because our clients are not in a war situation where it's not like the Ukraine, but de facto it's the same thing. We have to survive under much harsher conditions. What are they going to do? They're going to figure out what works, what doesn't, what's a power point, what's a fraud, what's actually transforming the business. American businesses here by and large have a huge advantage which America underestimates. What makes Americans interesting? We are very very pragmatic, we adapt, we learn we change.
Andrew Ross Sorkin:
“What's a power point and what's a fraud? And the reason I raise it, there's a lot of people who are running around either trying to pretend they're businesses like yours or pretend they're all sorts of businesses. What do you think of the washout that's happened in Silicon Valley, across the world, in terms of valuations?”
Alex Karp:
“It's very very hard to be joyous because people are in pain. But I mean we compete against Powerpoints and basic and technology that is useful but not transformative.”
“We compete against PowerPoints”
What Karp is saying here is that essentially Palantir’s software is like ChatGPT and the competitors software is like PowerPoint. ChatGPT can make the whole presentation in five seconds. The competition has to sit there and manually input everything in order for you to make a presentation.
Obviously he's making an analysis around the technological capabilities of a palantir. The revenue numbers and their earnings will tell the whole story if he's right about this. All of us are likely shareholders that understand a little bit more about the company. You understand the tech is better than the run of the mill tech. You understand if the tech is being used in Ukraine and Russia then it's probably better than everything else.
Ultimately numbers and sales are the best measure for this. I think Karp is pretty confident that in the long term it will play out. that
Alex Karp:
“This situation like the current one we're in, whether it's war in Ukraine, like why did they adopt Palantir? Because you can can't afford a fucking PowerPoint or a PowerPoint when your life is on the line. What's happening to businesses? Their revenues are going down, the regulation is going up, their workforce is unhappy for lots of reasons. They have to somehow rebuild their culture and attack. That exposes things in your business that are both good, bad ugly and transformative. And of course everybody wants to be like there's the Palantir of my cockroach.com farm. Like companies trying to compete against Palantir and it's like ‘We are the best for making sure that cockroaches and others get proper nutrition’ and yeah that works under good conditions, but it does not under bad ones.”
Andrew Ross Sorkin:
“What do you make though of the valuations that have taken place in tech land including to your own company.”
Alex Karp:
“Look, we've been at this for almost 20 years. Our valuation has been very high and very low, what we're very interested in is how the business is doing. I run this business for better or worse I know how the business is doing. and by the way, over the medium term, not the short term, valuations do reflect the health, integrity, and success of a business. In the short term that fluctuation in valuations exposes people who are out on the beach naked. You know if you're out swimming naked, which by the way I embrace, it's kind of hard when the [tide rolls out]. You know, it's just like if you're out here without the proper coat, it exposes the weakness in certain businesses. In the end, especially in America where adaptive, the stronger businesses will grow, thrive, expand, and we'll end up with a much healthier [market]”
Andrew Ross Sorkin:
“What do you tell investors who say look this stock has fallen, uh I mean.
Alex Karp:
“I can tell you investors what I tell our employees, look there's a market conditions that affects the share price.
Andrew Ross Sorkin:
“But is it market conditions? Is it the way the market views your particular company? There are investors who are frustrated with what they call dilution”
Alex Karp:
Right, right, there are a lot, they're legitimate and concerns we have to address. Dilution, what are the revenues going to be, where the revenue is going to develop, how transformative the products are. All legitimate concerns. What the investors we have primarily are, most important investors are co-workers, what we believe is; our business is stronger than it has ever been, and we have a lot of evidence that convinces us. We believe our conviction will convince the world over a multi-year period, and that's what I care about.”
Andrew Ross Sorkin:
“Right but the question is were the valuations before, when this stock was a $40 stock did you say to yourself that was Alice in Wonderland crazy town?”
Alex Karp:
“let me tell you something, one of the things that's been most helpful about running this company is that when you're kind of outside the norm, a little bit of a freak Show, like I never thought we were that good when the share price was 40 whatever. I didn't think we're that bad when the share price is 6 or whatever it is. I know that I know what makes the business strong and I'm focused on that.”
I actually like that analysis by Karp here because when Palantir was forty dollars, I think the valuation was about $100 billion and they were barely doing $1 billion dollars in revenue. At some level you have to be humble enough to realize your company is not worth $100B. While at the same time, being capable of understanding that just because the company is only valued at $14B now, it does not mean you're a failure.
What did you think of the interview?
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