Palantir Technologies (NYSE:PLTR) stock is down more than 18% in the last month in a rare turn of events. I say rare because PLTR stock has outperformed the S&P 500 by 95.5% and its sector by 94.7% over the past year.
As the data analytics giant continues to tread lower, frustrating bullish investors, the major question is whether it’s time to take profits on PLTR stock and wait for a more attractive entry point.
Let’s face it, PLTR is a multi-bagger. If you are long on this one, considering the business catalysts, operating model and experienced leadership, shares will reward you handsomely.
It’s no secret I am extremely bullish on PLTR stock. And moving forward, the factors affecting my bullish thesis will only amplify, not diminish. This is one big data company you cannot afford to avoid.
Peter Thiel’s controversial and secretive data analytics firm Palantir made its public market debut on Sept. 30, 2020, at $10 a pop, giving Palantir a market cap of $16.5 billion.
Since that time, the stock has swung wildly and recently became a Reddit favorite. The stock is down 8.8% year-to-date (YTD). This was bound to happen after the company galloped right out of the gate and investors started taking profits.
Larger macroeconomic issues are also contributing to overall bearish sentiment. The broader markets are cooling down due to increasing inflation rates. U.S. Treasury Secretary Janet Yellen sees “several more months of rapid inflation” before easing.
But the fundamentals have not changed.
A Closer Look at PLTR Stock
Palantir provides mission-critical software to several government agencies and has fostered an excellent relationship with them while building a separate, impressive commercial business side.
There are aspects of the company’s business model that are controversial. For example, Palantir provides software to U.S. Immigration and Customs Enforcement (ICE), which the agency uses to conduct its raids.
Such contracts have angered several Congress members, including New York Rep. Alexandria Ocasio-Cortez, who asked the SEC to investigate the data firm before it hit the stock exchange.
Defense, though, is a bipartisan issue. Even though some lawmakers may have different ideas regarding how best to protect the country, ultimately, if Palantir is the company that secures the safety and security of American citizens, it will continue to gain contracts.
Palantir recently deepened its relationship with the United States Space Force and the United States Air Force. The data company has inked a $32.5 million contract to provide software to the Air Force (DAF), Space and Missile Systems Center’s Cross-Mission Ground & Communications Enterprise (SMC/ECX) NORAD-NORTHCOM. This adds to its already impressive list of contracts.
SPAC Wars
Interestingly, Palantir has become an aggressive investor in companies going public via special purpose acquisition companies (SPACs). As of this writing, Palantir has participated in at least eight SPAC-related PIPE transactions, investing well over $100 million, using the deals to win contracts from emerging companies.
Shyam Sankar, Palantir’s chief operating officer, said a perception exists that Palantir’s software is only suitable for huge companies and government agencies.
“We don’t think that to be true,” he said. “With SPACs, we see a historic opportunity to invest in our customers.”
My colleague, David Moadel, wrote an interesting article highlighting Palantir’s SPAC activity. I want to call attention to the top investments and illustrate their impact on its business.
The big data analytics company invested $41 million in Lilium, a German developer of electric-powered air taxis, merging with Qell Acquisition (NASDAQ:QELL), a SPAC sponsored by former General Motors (NYSE:GM) executive Barry Engle.
Lillium has inked a five-year contract with Palantir. Other investors in the $450 million PIPE deal include Baillie Gifford, BlackRock (NYSE:BLK), Tencent (OTCMKTS:TCEHY), PIMCO, and others.
The next big investment is $21 million in Sarcos Robotics, which makes industrial robots and merges with Rotor Acquisition (NYSE:ROT). The merger includes a $220 million PIPE deal, with investments from BlackRock, Caterpillar Ventures, Schlumberger (NYSE:SLB) and others. Palantir has a six-year software contract with the robot maker. Again, if you want to know more about Palantir’s SPAC activity, I recommend you check out David’s article.
Buy the Dip
Palantir shares have benefited immensely from Reddit momentum, but at its core, Palantir is a company with excellent fundamentals and growth prospects. It will continue to do well on the strength of its strategic partnerships and aggressive investment strategies.
There will definitely be a set of ethical investors that will never like the company, but it isn’t a bottom-line issue. They are interested in the wider moral implications of the business and its product. But if you are looking for a solid investment trading at a discount, look no further than Palantir.
On the date of publication, Faizan Farooque 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.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio. Faizan does not directly own the securities mentioned above.
