Palantir (NYSE:PLTR) stock is trying to make a comeback. Don’t feel bad for it since it’s still up 140%, which is five times more than the S&P 500.
Recently the bulls suffered a blow going into the earnings. It is relatively weak because it has shed 60% of its value from the January highs. The dip was an absolute opportunity to buy into it or add to current positions. Consider that my not-so-secret conclusion and I will back up my story next.
There are a few dozen stocks that are the weapons in the Reddit versus hedge funds battle. PLTR falls on and off it, so it is messing with the natural price path of a quality stock. The January super-spike artificially exhausted the buyers. The bulls are still trying to recover from it and rebuild the base for long-term success.
Yesterday the battle flared and AMC (NYSE:AMC) exploded 35% in hours. Palantir was part of the group to a degree and rose 3% on no news. Here is the little secret that should give investors confidence. The opinions in social media do not impact the actual results that the company delivers. Invest based on facts not perceptions.
Facts Support the Bullish Argument for PLTR Stock
The Palantir profit-and-loss statement shows their progress in black and white. There is no speculation in knowing that they have $1.2 billion reasons a year to be optimistic. They doubled their total revenues since 2018.
The company still loses money but that’s part of being a growing business. Profitability is not as an important a statistic as growth. It is not cheap and it doesn’t need to be, just ask those who invested in Amazon (NASDAQ:AMZN) and Netflix (NASDAQ:NFLX) early. Impressive growth does not come cheap, and those who skimp will get mediocre results at best.
Investors should watch the Palantir management team members in action. Their investor events are impressive and they exude confidence. The company has two different revenue streams. One side serves the government and another for the commercial sector. They are both healthy and growing. Artificial intelligence is now more important than ever. The world has been casually chasing digitization for decades, but the pandemic made it an emergency. Suddenly everyone’s in a panic to get digital.
As a result, companies are now collecting more data than ever. Having it is useless unless you can put it to work. That’s where Palantir comes in.
PLTR stock will do well for as long as the stock market is bullish. Demand for their products and services is but a guarantee for years. They do have competition but they started early enough that they deserve early-mover credits. IBM (NYSE:IBM) has been touting AI prowess for over a decade. These guys are beating them to the punch in making it an actual business.
Buy the Dip With Confidence
PLTR stock makes for a better conviction long than short in the long run. Buying it on weakness is a solid bullish thesis. There could be temporary hiccups but only from outside factors. The markets are still near all-time highs, so they could be vulnerable to dips.
The bulls are having their way on days like yesterday, especially in the small-caps. The social media investors have insatiable appetites because they haven’t suffered consequences of a bear market yet. That test is yet to come, so the threat of a correction looms until then.
This is important because PLTR stock cannot rally on its own. For this reason, investors should leave room for error. Going all in at once is ridiculous with the current circumstances. The government has infused more than $5 trillion in stimulus. This is an artificial prop that will run out. Federal Reserve Chairman Jerome Powell promised us to be all-in into 2023. Recent inflation reports suggest that they might need to taper earlier.
There will be system-wide consequences in stock prices if the Fed changes course in its QE package. That’s why the market rallied hard in December 2018. Back then, Powell caved and flipped a tightening cycle into a new QE. Currently, the government is running the largest stimulus package in the history of Earth. That is as much tailwind as the bulls are going to ever get. Any abatement in that will cause a let-down correction in stock prices.
For perspective, a 10% drop in the S&P 500 would merely bring us back to the mean on a weekly chart. It wouldn’t be the end of the world, it would simply be normal price action.
Within that prism, investors should feel confident owning volunteer shares for the long term. Picking the perfect entry point is not as material as being part of it. Good assets withstand the test of time. Accumulating them a little bit at a time most often results in profits.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Nicolas Chahine is the managing director of SellSpreads.com.
