I came across Palantir (NYSE:PLTR) stock relatively recently and I have come to love it. Not so much as a company but rather, how it trades. What I also found was how impressive their fan base is. The Palantir stock bulls are ferocious and definitely are not weak hands. This alone makes this stock a must hold for the long term. Today I will try to make simple points to support my claims.
First and foremost, we have to acknowledge that the buyers are completely in charge on Wall Street. Investors are not willing to sell anything outright.
Shorting this rally has been financial death this year. This is astonishing because it’s the year with the worst economic conditions ever.
The U.S. government, mainly the Fed, is printing so much money that they flooded the streets with cash. Even though the records show that millions are out of work, the spending trends do not support it. For example, recreational vehicle sales this year were a record high and we are still in quarantine. One plus one doesn’t not add up to two.
Consequently, I don’t ask why and I just accept that the default equity direction is up.
Own Palantir Stock Into 2021
Within that prism, Palantir stock is one to own for at least a year. Their business model touches on many important investment themes. This includes the digital revolution, A.I., and data-is-king topics.
The company touts incredible artificial intelligence tools. Their goal is to empower teams to make use of their data for faster and better decision making. Added bonus is the fact that they have contracts with the U.S. government. That’s usually a goldmine for as long as it lasts.
So far things look good with the fundamentals. This is an old company but young on Wall Street. From the little data that we have public, we can tell that they are delivering on growth.
Sales grew 25% from 2018 to 2019 without growing their net loss. That is a good sign suggesting that management is spend-conscious which is a touchy subject on Wall Street. Case in point is how badly they treated Uber (NYSE:UBER) last year until that company re-committed to controlling costs.
This year Palantir’s growth is even larger but they still need to control spending. I think the pandemic will be excuse enough to give them cover in 2020. Even if investors gawk at the next report it will be temporary just like it was with UBER.
It Is Not Cheap
When evaluating growth companies for comparison I like to use Amazon (NASDAQ:AMZN). It has consistently grown its sales 30% a year for a decade. In spite of this accomplishment investors still short change it on value. AMZN’s price-to-sales is only 4.5x. From that perspective, PLTR stock is nine times more expensive.
For more comparisons I offer you two more fast stocks. The first is Tesla (NASDAQ:TSLA) and it is half as expensive. The second is Snowflake (NYSE:SNOW) and it is almost five times more expensive than Palantir stock.
This year we saw the surge of the Robinhood investors. This gives PLTR another silly advantage and that’s the low face value of its stock. Palantir being a low two-digit stock makes it attainable for all account sizes. It gets more interest than one that costs three digits or four like Shopify (NYSE:SHOP).
In summary, Palantir stock is one I’d own for at least a year inside this bull market that won’t quit. It has very few knocks against it and the shorts will have a hard time keeping it down. In a prior write up I drew the chart showing that above $12 per share PLTR stock would rocket higher. This can repeat at the drop of a hat. The shorts should be nervous now that they know it’s capable of such bursts.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Nicolas Chahine is the managing director of SellSpreads.com.