The premise behind Palantir (PLTR) is super simple — digitalization is the single largest investment opportunity in mankind’s history and there’s only one company that’s written the big data engine needed to process it, explains Keith Fitz-Gerald is principal of the Fitz-Gerald Group and editor of One Bar Ahead, a digital magazine exclusively for individual investors and traders.
Palantir is controversial and, according to some, overvalued. There was concerted short attack after shares rose 362.1% following the company’s trading debut via a direct listing on September 30, 2020 at $7.25 to a post-IPO high of $33.50.
I think the fact that several analysts including Credit Suisse and Morgan Stanley are poo-hooing Palantir is great because they’re scaring the "quick and weak" money out.
Billionaire George Soros is on record saying he regrets investing and intends to sell shares because he doesn’t like the company’s business practices which is, presumably, a dig at Palantir’s involvement in national defense. All of this paves the way for higher prices.
I believe Palantir is a $50 stock a few years from now and I also believe that Wall Street is very quietly using the pullback to accumulate shares, but that data is not yet available to confirm my supposition as of this writing.
Stocks like Palantir have a funny way of proving their detractors wrong over time. Consider:
• The company’s software is the de facto operating system for the entire United States and Allied Defense Network as well as the infrastructure backbone for the United States healthcare system.
• Palantir is a key player in the fight against Covid-19 and vaccine distribution.
• Revenues are on track for 40%-50%+ growth year over year. Average revenue per client is rising at 35%-40% annually. Gross margin is rising and may remain 70%+ in 2021.
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• Government business growth may track 65%+ this year as defense spending accelerates.
• Palantir is 17 years old which means that fears about its destiny under a Biden Administration are likely overblown because the company has already done business with prior administrations.
• Profitability is likely a lot closer than people think.
Action to Take: Back up the truck if you can get Palantir under $15-$20. Nibble in between $20 - $30. You’ve got time because the short-sellers and naysayers have not let go yet. But they will as the company edges towards profitability.
More aggressive investors may want to consider selling cash secured puts to gain an even lower “buy in” but the danger is that the stock may never drop once the scared money leaves so anybody pursuing this course could wind up empty handed. (Disclosures: Keith owns and trades shares of both Palantir as do members of his family.)
