PLTR Stock: A Bullish Take On a Company with Bearish Sentiment

There are quite a few reasons the market appears to be down on Palantir Technologies Inc. (NYSE:PLTR). Indeed, shares of PLTR stock have given up the gains this stock has seen over the past three months. There’s a tremendous amount of downside momentum right now with this stock. And yes, I recently wrote a bearish piece on why I think this momentum could continue.

However, being the optimists we are here at Investorplace, let’s look on the bright side.

A banner for Palantir (PLTR) hangs on the New York Stock Exchange.
Source: rblfmr / Shutterstock.com

The Bull Case for PLTR Stock Is Enticing

Palantir‘s underlying business is truly an exciting one for many growth investors. Indeed, this company just screams long-term growth. Accordingly, its current dip makes this stock look extremely attractive for those with this lens.

Palantir’s focus is on providing a software platform that relies on big data to provide actionable insights for its clientele. Given the growth trajectory of the artificial intelligence and big data spaces, investors have piled into this trade since October for good reason.

Who exactly are Palantir’s customers?

The U.S. government happens to be a big customer. In fact, more than half the company’s revenue was derived from various government agencies this past quarter. The stability of the cash flows these contracts provide shouldn’t be discounted. When the government vouches for a company’s product, other clients tend to come out of the woodwork.

Indeed, Palantir’s revenue growth of 47% this past quarter is evidence of this. Palantir’s near-term growth rate could accelerate as private-sector clients in the healthcare, manufacturing and energy sectors increase spending in Palantir solutions. Palantir already has a pretty impressive book of high-profile clients, and I think the company could continue to grow its non-government book of business substantially over the medium- to long-term.

Fighting Against This Current Fraught with Risk

The bullish argument behind why PLTR stock could outperform is great. However, the reality is there is a very strong current flowing the wrong direction right now.

Accordingly, investors are taking on some pretty significant near-term risk for potential medium- to long-term gains. It’s possible the tide could turn quite rapidly, and the positive momentum this stock has shown since the company went public via direct listing year could resume. After all, this is a great company operating in a sector with excellent long-term catalysts.

However, investors need to keep in mind that selling pressure may continue for a little while longer, due to the recent expiration of the lock-up period tied to the company’s direct listing. Yes, I do think the ultimate impact of this catalyst will be very short-term in nature. Indeed, insiders who wanted to sell likely already have, or will do so soon. That said, it’s a near-term risk that needs to be considered.

Additionally, worse-than-expected earnings results don’t make for a positive near-term outlook. Investors buying stocks on the basis of fundamentals don’t like the surprise loss. Indeed, there’s a large group of investors that want to see bottom line performance as much, or more, than top-line growth. I think Palantir is a stock that may remain on many investor watch lists rather than in their portfolios until some significant improvement is seen on this front.

Conclusion

PLTR stock is one that is beaten up right now. It’s dipped nearly 50% from its peak just weeks ago.

Value investors, or at least growth-at-a-reasonable-price investors, may view this as a buying opportunity. Buy low and sell high – that’s still a thing, right? Indeed, if one believes in the long-term potential of PLTR stock, this is a great time to get in.

For those who believe more downside may be on the horizon in the near-term, watching from the sidelines is probably best. I’m in the former camp right now, as I do think investors will likely be able to pick up shares in PLTR stock at a greater discount.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.


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