With the Election Looming, Palantir Stock Looks Too Risky

Palantir’s (NYSE:PLTR) connections with President Donald Trump and the likely antagonism towards the company by Democrats make PLTR stock quite risky ahead of the U.S. elections.

PLTR Stock: Headquarters
Source: Sundry Photography / Shutterstock.com

More specifically, Palantir is likely to be hurt down the road if Democrat Joe Biden beats Trump.

That’s largely because Palantir was founded by Trump supporter Peter Thiel, and the company provided profiling software for Immigration and Customs Enforcement, or ICE, which is viewed unfavorably by many liberals. Palantir’s mission is unlikely to be prioritized by a Biden administration.

In a recent column, InvestorPlace contributor Chris Tyler explained that “Palantir’s tools allows users to identify patterns hidden deep within cloak and dagger data sets and execute real-world responses to identified targets or threats.”

Another InvestorPlace columnist, Thomas Niel, reported that “the company’s work with U.S. Federal Agencies remains its bread-and-butter.”

Joe Biden and Palantir Stock

Palantir co-founder Peter Thiel was among Trump’s most prominent backers in 2016. Indeed, four years ago, Thiel even spoke at the Republican National Convention and provided over $1 million in donations.

He decided to avoid contributing money to back Trump this year’s election because he thought the president would lose, The Wall Street Journal reported in July. But Thiel may still vote for Trump, the newspaper added.

Meanwhile, Palantir has alienated the large Silicon Valley companies that tend to be closely allied with Democrats. Specifically, its CEO, Alex Karp complained about the liberal “monoculture” in the Bay Area, suggesting that big tech companies are traitors selling American identities to China. For his part, Thiel indicated that the FBI should probe Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL) for helping the Chinese government.

In light of Thiel’s help for Trump in 2016, Palantir’s work for ICE  along with the company’s verbal attacks on Big Tech The company could have trouble getting much work from the federal government starting in 2021 if Biden wins the election.

Further, Trump’s policies and focus on immigration, China, and terrorism were probably quite good for Palantir. That’s because data mining would be a big asset when it comes to combating illegal immigration, terrorists, and spying and cyber-sabotage operations by Beijing.

But Biden is looking to prioritize domestic programs like changing the health insurance system, making America greener and rebuilding our infrastructure. Data mining, I think, would not be as useful  in facilitating those initiatives. And to the extent that a Biden administration needs data mining, it’s likely to turn to a pro-Democrat Silicon Valley company, instead of Palantir.

Meanwhile, given Karp’s anti-Silicon Valley views, Palantir could have trouble obtaining partnership deals with any major tech companies.

Decelerating Revenue and Lockup Expiration

Palantir’s recently released Q3 and full-year revenue guidance indicates that it expects its top-line growth to sag to less than 30% for fiscal 2020, down from nearly 50% year-over-year growth in the first half of the year.

And in 2021, the company now anticipates that its top line will increase at a rate greater than 30%. The fact that the firm expects its growth to meaningfully decelerate going forward versus the  first half of this year is certainly negative for PLTR stock.

Also negative for the shares is the fact that a major lockup expiration is expected to occur at the end of March or the beginning of April. Lockups prevent certain shareholders from selling their stock until a certain date. On that day, known as the lockup expiration date, these shareholders can sell their stock for the first time.

Stocks tend to fall sharply on their lockup expiration dates. According to Barron’s “the vast majority” of PLTR stock will be affected by a lockup expiration date 180 days after the shares became available to the public on Sept. 30.

The Bottom Line on PLTR Stock

The risks facing Palantir under a Biden administration would be quite elevated.  Long-term investors should only consider buying the shares, after the lockup expiration date, if Trump is reelected.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Larry has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.


Article printed from InvestorPlace Media, https://investorplace.com/2020/10/with-the-election-looming-palantir-stock-looks-too-risky/.

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