There are two reasons Palantir (NYSE:PLTR) shares are off to the races this morning, but neither has to do with any specific company news. So what do you need to know about PLTR stock now?
To start, most investors should know that Palantir has been an incredibly popular stock right now, particularly with individuals on trading apps like Robinhood. After coming public toward the end of 2020, many see the software firm as a beneficiary of Election Day. In other words, a lot of hope is riding on President-elect Joe Biden.
However, after rushing to new highs following Election Day, PLTR has pulled back from its 52-week highs above $33. Analysts rushed in with bearish calls, and many investors have simply been worried about its valuation. Just yesterday, Citi analysts set a $10 price target on PLTR stock citing those valuation concerns and the competition Palantir faces in its core business. For those unfamiliar, Palantir offers a variety of data analytics solutions, and has focused in the past on defense and surveillance customers. In recent weeks, Palantir has expanded relationships with foreign governments, the U.S. Food and Drug Administration and the U.S. military.
So with that in mind, why is PLTR stock rallying today?
One reason is that not all analysts agree with Citi. In fact, Jefferies analyst Brent Thill reiterated his “buy” rating and raised his price target from $18 to $30. Although $30 is not far off its current trading price, it is still a lot better than bearish targets near $10. Behind his target is his assumption that Palantir will extract 81%-82% gross profit margins from sales of $1.4 billion in 2021. Additionally, he is assuming those same profit margins on sales of $1.8 billion in 2022.
While investors are likely cheering on a bullish viewpoint, there is another possible reason PLTR stock is soaring…
What to Know About PLTR Stock Today
Another reason behind the swing in Palantir could be options-related volatility. Today is Jan. 15, a popular date for options and futures to expire. A quick glance at open interest for options expiring today will show you that it is much higher than open interest for options expiring next week, for example. What does this really mean? Investors should take this reality into consideration when evaluating the move in PLTR stock. While the analyst note is likely a huge source of confidence, the options component is likely behind some of the volatility.
Moving forward, what should you do? Well, there is no denying that analysts are split on PLTR stock. However, continue to do your own research and evaluate the potential catalysts. With the inauguration of Biden next week, Palantir could soar once more. However, any meaningful jump in its business thanks to Biden could take some time to come. That should underscore the reason for confidence here, but does not negate the potential.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer with InvestorPlace.com.