Palantir Technologies (NYSE:PLTR) continues to be a stock that investors love to hate. That is, unless PLTR stock dips below $25, then investors of all stripes get bullish and drive the stock price up.
At the time I’m writing this article, Palantir is trading at $22 and the stock chart appears to have a bullish setup.
But how high will it go? Sentiment around the stock in the analyst community remains very bearish. Palantir has received four (that’s right, four) sell ratings. And to date, only eight analysts provide ratings on PLTR stock. That alone is likely to create a headwind for the stock’s growth.
But, if you agree with the company’s CEO, that may be exactly how Palantir likes it.
Look Beyond the Headlines
“Don’t click on it,” I thought. But I did, and sure enough the headline I saw on Seeking Alpha was just clickbait. The article itself was highlighting remarks made by Palantir’s CEO Alex Karp made in an interview with CNBC. I’ve also included a similar article by William White for InvestorPlace. And I give a tip of the cap to White for an accurate, yet still click-worthy headline.
Here’s what Karp said:
We’re in this for the long haul. If you are speculating or you’re thinking about this short term, there are plenty of other things to invest in. If you want something else, it’s a huge world. Buy some other stock. You don’t have to buy Palantir. No one is forcing you.
You can decide for yourself. But to me those comments amount to nothing more than a motivational speech. It’s the type of “us against the world” comment you might expect to hear from a coach before their team takes the court for March Madness.
To boil down Karp’s comments, Palantir is playing the long game, and Karp also implied, retail investors. Karp said that one of the reasons the company chose to go public via a direct listing was to appeal to individual investors.
And the stock certainly appeals to individual investors. In early February, 60% of PLTR stock was owned by individual investors.
Should You Buy PLTR Stock?
Companies are criticized, and rightfully so, for too much short-term thinking. So, it’s different to hear a CEO suggest that short-term investors need not invest. It’s even more interesting when a publicly traded company pokes at the institutional investors that typically make up a good bit of the company’s base.
A popular criticism about PLTR stock is that the company has not been able to scale its customer base despite being in business for nearly 20 years. And a larger concern is that the company may find it difficult to add new clients quickly.
Each client requires high initial development costs. Whether it’s a government contract (Gotham platform) or a company in the private sector (Foundry platform), Palantir has to customize its solution to the task at hand. The company has increased its sales force as a nod to shareholders. However, it will still take time.
Another critique of Palantir is that despite the company increasing its revenue by 40% on a year-over-year basis in the fourth quarter of 2020, it’s still not profitable. Remember, Palantir has been around awhile so it’s (rightfully) being held to a higher standard.
Putting all of that aside, Palantir operates in the big data sector that is not going to become less important in the next decade. Furthermore, the company has no lack of government contracts. These will serve to raise the floor on revenue. And, it appears, the company is guided by smart people who have their own skin in the game in terms of insider ownership.
Over time, that’s a combination that should reward investors. A year from now, PLTR stock at $25 is likely to look like a massive bargain.
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.