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palente tier off to a rocky start in the
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New Year the stock was the worst
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performer in the S&P 500 yesterday
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dropping nearly 8% its biggest decline
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since May it's a major change in
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sentiment and momentum Palante here best
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performing the S&P 500 last year soaring
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340% on hopes companies will keep
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spending massive amounts on AI software
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but despite the surge the street is
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still not quite sold with more than 80%
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of analysts covering the stock
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maintaining a hold or sell rating making
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this a good Battleground stock joining
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me now as Malik Amed Equity Analyst at
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Morning Star who has a hold rating on
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the stock and Derrik an senior
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investment strategist at crane shares
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which owns paler and its Ai and Tech ETF
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gentlemen good morning great to have you
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both here uh Malik I'm going to start
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off with you um one of the issues that
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you have you're the Bear in this
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conversation is the valuation of paler
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at about 150 times according to our
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system is there any other big issue with
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this company and its narrative other
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than this really elevated
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valuation um to be very honest with you
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first of all good morning uh to be
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honest with you
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uh as we think about paler business we
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really like it right like it it is it is
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one of the only AI pure plays out there
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uh the company's business is great uh
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the US commercial side of the business
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is actually doing really well and is
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firing in all cylinders so our sort of
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like issue with paler um as as as a as a
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stock has been its valuation and that's
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what we highlighted over the last few
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quarters that the valuation is getting
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out of hand um and especially if you
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think about you know trying to bake in
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the assumptions that would take you to
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the current uh sort of stock price um
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those are some very very optimistic
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assumptions so Dereck I want to come
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over to you uh in previous years paler
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was a bit of a black box did a lot of
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government work it wasn't really clear
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what they did to a lot of people now
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they've expanded out to commercial work
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so we're talking about this valuation
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and just the potential Tam that they
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could have with obviously a lot of us
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and global companies looking to uh
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upgrade themselves with AI um do you
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believe the valuation is overstretched
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as
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well oh well thank you for having me we
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had CR see tremendous long-term
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potential for penter while the current
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valuation is very optimistic We Believe
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penter could become the goto operating
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system for Enterprises in AI age we're
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talking about a potential trillion
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dollar market opportunity here right so
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now paner is a key holding in our cran
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shes Ai and Technology ETF
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agx uh this ETF giving Wester a balanced
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exposure of both AI infrastructure and
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AI deployment and applications what's
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really exciting is how the AI deployment
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is really taking off in the Enterprises
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World companies are seeing real benefits
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uh better efficiency happier customers
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and this is creating a Snowball Effect
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for AI adoption pent here really stands
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out in this space their AI platform
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particularly their onology system is a
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game changer Cher it brings together
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data logic and action in a way both
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humans and AI can actually work together
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plus the AI platform has top-notch
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security features which is crucial for
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companies to adopt AI safely we also bu
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on patent government business of the
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Trump Administration is really
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prioritizing government efficiency and a
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digital transformation this could be a
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start of a long-term Trend potentially
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brings billions of revenue for penter in
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the future all right Malik I want to
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come back over to you I mean valuation
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is about you know forward looking you're
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You're Expecting Revenue growth and
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other things to kind of meet that
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valuation do you agree with dererk had
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to say that this company has a lot more
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upside than maybe we've even seen last
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year again 340% gain because Dereck
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seems to be saying they have a bit of a
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moat they have uh proprietary software
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that other people can't seem to quite
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match first of all uh I completely agree
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with sort of uh uh uh Derek's uh uh
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point about about them having
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competitive advant
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when we sort of look at our mode
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methodology we do award paler and a
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economic mode um now as this relates to
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you know as you said valuations are are
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are are forward looking um I would again
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sort of like put that question back is
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like what do you need to believe about
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the top line or the margin profile for
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this business over a five 10 year period
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time period for you to get to what $70
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or $80 as it was Trading
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just a few days ago uh uh dollar per
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share valuation and I actually tried to
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do conduct a reverse TCF where you sort
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of like bake in what assumptions would
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get you to the stock price and the
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numbers that I got were would have put
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palun tier way ahead off eventally all
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the all the top software companies out
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there you would have like a 10-year
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Topline ker of around 30% you would have
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margin profile Gap operating margins of
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north of like
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55% if that's the if that's the sort of
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assumptions that you have over a 10year
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period you could probably buy the stock
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at $80 uh but when we're looking at our
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our own assumptions again they're very
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optimistic they're they they they factor
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in a lot of the stuff that deric has
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talked about but we don't get there we
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don't get to um $70 all right Malik and
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Derek great to see you both thank you
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very much for uh talking a little paler
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for us we have to wait and see uh
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meantime take a look at chairs of paler
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they fell as well B 8% 7 7.8% yesterday
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now down about 14% for the week on
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Monday night several funds from Cathy
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Wood's Arc Investment Management
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unloaded nearly 200,000 total shares of
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paler that comes as Morgan Stanley
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initiated coverage of paler with an
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underweight rating and $60 price Target
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uh on Monday the analyst said success is
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more than priced in with paler trading
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around 160 times earning and that stock
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at 6885 I mean it was I I think the one
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of the best performers
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last year in the S&P 500 if you look at
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what happened with that stock too so
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maybe not surprising to see a pullback
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after a much longer upward um March at
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least over the last and that was really
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a combination of just all of the
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geopolitical issues in the country plus
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then you in the world rather say and
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then you add the Trump on top in the
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election and I think there was a view
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that that paler would be a massive
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winner depending on how you think the
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dod budge and everything else gets re
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calibrated and there's the one year up
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33% um Palante here being the their's
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one Kathy Woodsman aggressive seller Arc
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she been a big believer I got the Alex K
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biography yesterday it turned out to be
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37 pages I got to get the different one
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there's like three of them one of them I
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think is you know remember he is a crack
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shooter he went to I know how to
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pronounce Gerta and it's neoliberalism
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it just gets better and better and but
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better he's the bond of intellect all
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right on on clearing out then is paler
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still in that clearing out phase as well
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to abulous rule of 40 they've got great
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grow great well don't dismiss that b m
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bill mcder from service now has
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tremendous rule of 40 day but how dare
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you dare margin and revenue growth is
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that what yeah well there you go yeah
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yeah you're like a quantum computer when
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it comes to rule of 40 it's it is cold
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in here yes exactly I need it to be very
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cold as you know now look the quantum to
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cubits which 15 years from now I'm
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really going to be going now the
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Stanford computer uh group The
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professors really believe in in it so
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it's not like it's fanc wait we're back
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to Quantum now well I'm trying to give
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you a
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full paler paler is a tremendous look
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paler is Peter teal it's know all those
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things but it's also a stock that was
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trading in 50 years worth of revenues so
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is it it had a great last quarter the
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last quarter was great the revenue
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growth was great you were in the room
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when he spoke I was will you please show
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some difference I tried if only just
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because of his incred hairstyle
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beautiful want to focus on paler shares
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now Under Pressure yet again today down
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near 15% this week alone simam Modi has
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a look behind that big drop for one of
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the biggest winners of last year and
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Scott even when you look at a longer
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term chart shares of paler down about
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16% from the record high it hit on
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December 24th the move has coincided
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with about 45 million dollar in Insider
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selling this year all pre-planned most
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of that aggregate total was sold by Ryan
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Taylor theany 's Chief Revenue officer
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according to Varity data and a view of
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sec's filings meantime Kathy Woods Arc
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fund sold about $1 15 million of stock
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uh stretched valuations that continues
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to be a key focal point for Wall Street
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even with the drop in paler shares it's
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still trading at a premium at 146 times
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forward earnings making it the seventh
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most expensive stock in the igb software
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ETF and if you look at just ratings
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across the street uh for paler there are
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three buys 12 holes and eight sell
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ratings on palente other software names
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worth noting trading at a higher
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multiple than the software sector
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includes Sentinel 1 confluent and crowd
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strike which is at about 92 times
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forward earnings right now and Scott it
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does seem like the street is getting
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more selective with Deutsche Bank today
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bullish on the sector yes but they
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suggest that a slower than expected ramp
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when it comes to gen adoption and
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elevated CeX could pressure margins
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analysts there are downgrading Adobe and
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Paulo Alto Network to hold from buy and
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they're upgrading work uh day to buy
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Scott all right sea thank you uh sea mod
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so Joe let's start with paler uh because
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you own that but I want to Branch this
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conversation out to some of the other
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software names that have ownership up
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here with their pees uh which are rather
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lofty but palente here what you tell our
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viewers I continue to say to viewers in
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palente here sit back wait do not reach
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the stock here upper 50s to low 60 if
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you don't own it that's where from a
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risk to reward standpoint I take the
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initial shot okay to paler the hottest
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stock in all the S&P 500 last year 340%
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gain it's down a couple percent this
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year what do we do with Palante tier
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Michael okay I I if you all promise not
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to tell anybody promise not to tell I
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have a concession just between you and I
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I bought this stock in may just just
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between us there we go I bought it in
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May in my personal account because my
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son my brilliant son Robert says Dad I
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like this stock you should buy some I
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didn't buy enough needless to say I
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tripled my money in 6 months I've sold
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80% of my position maybe more that's a
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guesstimate but it's it's it's about
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that and I've kept some chips on the
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table to see you know okay what what
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I've gotten all my money out plus plenty
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uh I'm going to hang on and see what
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happens here but I I didn't buy it
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across the board it was too risky that
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is the best story I've heard from
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Michael the your son told you to buy you
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bought on the personal you got to always
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listen to the kids they'll get you an
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Nvidia they'll get you in all this stuff
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Michael B what she said and as you hold
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the stock but you sold half of it to
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start the year uh because you were
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getting a little uneasy with where you
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saw not only the valuation but the
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meteoric rise that the stock had yeah
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cuz I mean we we all know that stocks
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always well certain stocks will go much
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much higher and then certain stocks will
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go much much lower than they should and
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that's just like the mechanism of the
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market but when when I looked at the
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stock at the beginning of the year I
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think it got up to 90 times 2025 sales
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estimates and that's just so maybe it
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was 90 I think it's around 75 right now
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that's just nose bed so I just couldn't
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it's a great company but I just think it
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the valuation just got irresponsibly
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high and I think that's also why you saw
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Insider selling just taking advantage of
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really the frenzy around the name you
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know they're going to come into to
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earnings on February 5th the revenues
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and earnings are going to grow I think
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we're looking at 27 and 40% revenue and
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earnings growth but I think right now
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when you have a technical breakdown it
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just traded below the 20-day the 50 days
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is in the 50s I think you have to let it
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settle in because sentiment has switched
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on this name and so let it settle in and
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find a new base before adding to a new
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position please leave a like on this
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video so more people will see it and
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while you're down there please consider
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subscribing it's free and you can always
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change your mind thanks for watching and
00:12:31
hopefully I'll see you in the next video
