Editor’s Note: This article was updated on Feb. 1, 2021, to correct the manner in which Palantir came public.
Palantir (NYSE:PLTR) was one of the most analyzed stocks in the last quarter of 2020. In the first place, the company exists in the “Big Data” sector that is growing by leaps and bounds. Also, the company is associated with some government contracts that some find unsavory. Nevertheless, every time, PLTR stock begins to drop, investors are using it as a buy on the dip opportunity.
As I look at the PLTR stock chart since it came public, the stock volume suggests there is more conviction on the buying side.
Some of this activity could be related to speculators looking to take advantage of the volatility that typically follows a new stock. But it certainly seems that investors want Palantir stock to go higher.
There are two key factors that investors need to pay attention to. First, the lockup period is going to end in February. Since many shares are likely to enter the market, PLTR could see a drop. In the meantime, it remains to be seen how soon Palantir will benefit from a Biden administration. That’s because the pandemic still rages on.
The Pandemic and PLTR Stock
As I’ve pointed out in a prior article, Palantir has relationships and has done business with both parties. As much as some people would like to make the company an ideological play, the evidence doesn’t support that.
With that said, I have little doubt that Palantir will benefit from the Biden administration. But the first 100 days is taking place amid the backdrop of the still ongoing pandemic, and Palantir does have a contract to provide insights about the virus.
It also has a contract with the United Kingdom’s National Health Service to help the agency understand how the virus spreads among at-risk populations.
The Biden administration is going to push for more stimulus. I don’t put anything past the government in terms of its proclivity for spending. However, you have to think (or maybe hope) that the spending will be a bit constrained to the immediate needs that are arising from the pandemic. If that were to happen, then there may be a delay in the issuing of contracts.
This would affect Palantir, in particular, because the company is heavily dependent on government contracts and those contracts tend to be a bit smaller in nature.
One of the reasons that a stock will show volatility after its IPO is that investors are waiting for the lockup period to expire. When that happens, some of the early investors look to get out of the stock or reduce their exposure.
As more shares flood the market, the stock price tends to dip. In fact, lock-up expirations often correlate with a 1-3% drop in the company’s stock price.
Looking Forward for Palantir
I thought I was watching a home improvement show when I read Lou Carlozo’s article about Palantir. But the company will be hosting a virtual Demo Day on Jan. 26. In light of the lock-up period coming to an end, and a couple of negative analyst ratings, the timing couldn’t be better.
My overall opinion of Palantir stock remains where it was first in November and again in December. Investors need to decide when to pull the trigger. If you don’t already hold a position, the company’s February earnings date may be one to circle on your calendar. The company posted a profit in its most recent quarter.
But investors are a “what have you done for me lately” bunch. So if the company can post another strong quarter, it may be the catalyst to move the stock higher.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for Investor Place since 2019.