Purchasing Palantir (NYSE:PLTR) stock continues to make sense for a specific type of investor. Let’s start with what you won’t get when buying Palantir shares.
Are you likely to get quick growth from PLTR shares? No, probably not. Sentiment surrounding Palantir has essentially settled since March. Following a few months of volatility after its September IPO the market has maintained a tight price range for PLTR.
Are you going to get a profitable company? Again, no. Palantir posted a $138.58 million net loss in its most recent earnings report. That won’t hurt it much on a prices per share basis anyhow. But what you are getting in Palantir is an analytics firm that is deeply intertwined with the public sector.
That Makes PLTR Stock Appealing
At least it is to a certain type of investor. PLTR stock is undoubtedly geared toward the conservative investor who prefers steady growth. In the case of Palantir, this will come in the form of an increasing base of contract wins.
There’s nothing controversial about that. And Palantir isn’t controversial to those who would invest in other defense contractors. In fact, it seems likely to remain highly appealing to that investor base.
If you’ll remember back to Palantir’s pre-IPO days, its appeal was its anti-Silicon Valley, conservative slant. CEO Alex Karp then publicly noted the growing rift between the values of Silicon Valley, where Palantir began, and his firm. However, as time went on these differences became untenable. Though Palantir remained a part of the Silicon Valley tech bubble Karp noted: “we seem to share fewer and fewer of the technology sector’s values and commitments.”
That was a highly attractive offer in an increasingly polarized world. I thought it was clever marketing by Palantir. They essentially marked themselves out as the firm of note sitting at the confluence of traditional conservative principles and forward analytical capabilities.
Therefore, PLTR stock prices reflect the company’s steadfast conservative nature.
Expect Steady Prices
Investors in Palantir are in it for the long haul. The only volatility of note occurred in the months following the IPO. The market was scrambling to figure out what Palantir really was. IPO investors gobbled up shares at $9.20. Those who didn’t take profits off the table when prices hit $35 in February still have plenty to be thankful for.
That’s because shares trade around $24 today. And that’s where they should stay. Palantir’s investor base is entrenched. As a result, you’ve seen prices that seem to be locked in a tight range between $22 to $25.
That’s why I’d suggest investors ignore bearish sentiment around Palantir.
Ignore Wall Street Bears
Back in February 2020, Palantir and BAE Systems (OTCMKTS:BAESY) were announced as finalists for an $823 million contract from the Army. Palantir was ultimately selected to fulfill that contract.
Even though the news is seemingly positive, Citi (NYSE:C) analyst Tyler Radke took issue with the indefinite delivery and indefinite quantity wording of the contract. His basic argument is that it is difficult to therefore quantify measurables including revenues moving forward at Palantir.
That’s a perfectly logical take. It’s easy to sympathize with him in his attempts to succinctly quantify exact numbers in such a large project, and one related to the government no less. But I differ with him in his $18 price target for PLTR stock on that basis. Palantir is doing precisely what it intends to in winning government contracts. Sure, we won’t be able to pinpoint which quarters that $823 million revenue will arrive in. But on the other hand, Palantir nailed a huge contract.
That’s what its conservative base seeks. A company that reflects its values and commitment to U.S. defense and conservative values. And one that derives a lot of business from that. I don’t think there’s any reason to believe that should change. That’s why I think Palantir will maintain a slow upward ascent for the foreseeable future.
On the date of publication, Alex Sirois 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.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.”
