Every once in awhile I come across stocks that cause aha moments. A few months ago while doing a video on Palantir (NYSE:PLTR), I realized that I wanted to trade it for a while. PLTR stock has been a pleasure to trade since then because there is quality behind it. Spoiler alert, I like the idea of owning the stock for the long term. Therefore, it’s an investment idea to boot.
While the company hasn’t been public for long, it has existed for 17 years. They provide artificial intelligence services to commercial companies as well as the government. They empower teams to aggregate and better utilize their data. Having information is good but Palantir makes it easy to make it actionable.
I know first hand that managers are starving for reliable decision-making assistance. I did the financial planning for hundreds of restaurants and I would have loved to have these tools.
They Cast A Wide Net
The applications for the company’s services are virtually limitless. They cross industries and even within departments. The digitization trend is not a fad. The demand for electronic information is growing exponentially. This plays into Palantir’s hand perfectly. They will have no issues finding those who need their services for at least a decade. That’s a long runway so that management can focus on executing well.
It’s not a surprise then to see that they have a healthy profit-and-loss statement. They are showing a steady growth path. It’s not cheap from the traditional sense, but it doesn’t need to be yet. Wall Street usually gives it a pass on the profitability for as long as they are growing. Management members all sound very confident and represent it well. When the people that work there seem like they love what they do, I get interested.
I also like that the PLTR stock chart doesn’t show a crazy ramp like some of the EV SPACs. It has had a few crazy moments when the Reddit fight broke out over GameStop (NYSE:GME). But after the initial burst up from single digits, it stabilized and has been consolidating for three months.
Buy the Dip in PLTR Stock
The fly in the ointment is the mega spike to $45 that shouldn’t have happened. It ruined a great breakout line at $30 per share. Now they come at it again, and with more confidence. Once a stock falls sharply and rebounds, it rallies in the hands of stronger investors. The weak hands fall off in panic and ownership transfers to fresher investors.
The trading range has been consistent. The bulk of the action was between $22 and $30 per share. Every dip to the lower edges is a buy point, like Friday. Every breakout from $30 per share will bring momentum buyers. This could happen in two months. For traders, it’s a case of buy-the-dip or buy-the-rip. Investors should just buy-the-dip and forget it for a few years.
The bulls will face the first challenge next near $28 per share. That’s where they failed last time, so if they can break through it they overshoot. I’ve been consistently bullish on it all year, but from the right spots, and it’s worked out well. I will carry this trading pattern for as long as it continues to work.
There are no apparent fundamental risks from within. However, there is extrinsic risk from the market as a whole. Yesterday, we broke new records, so the bull market goes further under iffy conditions. This opens the door for a macro-correction that would drag all stocks, including this one, down.
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.