Based in Colorado, big data analytics company Palantir (NYSE:PLTR) is one of the most intriguing businesses on the New York Stock Exchange. On financial message boards, you’ll find that traders seem to either love or hate PLTR stock.
Over the years, Palantir has become known for providing counter-terrorism-focused intelligence to U.S. government agencies. Additionally, the company has established business ties with a number of private enterprises.
To make it even more interesting, PLTR stock apparently became a target of interest among some Reddit traders in early 2021. In fact, Palantir was likely the target of a massive short squeeze in 2021 which sent the share price higher.
Today, however, the hype phase is in the rearview mirror. Further, one Wall Street analyst isn’t particularly enthused about the company. But that’s perfectly fine. True contrarians should embrace the pessimism and look to the facts — not the FUD (fear, uncertainty and doubt) — for guidance.
A Closer Look at PLTR Stock
Going back to the beginning, PLTR stock started trading on the NYSE on Sept. 30, 2020, via a direct listing. The share price stayed near the $10 area for a while. However, in early 2021, a speculative buying frenzy commenced.
Low-priced PLTR stock looked like a perfect target for a Reddit short squeeze at that time. As it turned out, on Jan. 27, 2021, the stock reached a 52-week high of $45.
Unfortunately, the share price dropped almost as quickly as it had popped. In May, the stock sank to a support level of around $18. For the remainder of the year, PLTR exhibited a resistance level of $28.
As such, it might be wise to take profits if you own the stock and it reaches the $28 price point. As 2021 has come to a close, though, Palantir has come back to that $18 support level. That should be very enticing for contrarian investors.
Grumpy and Lumpy
Even if we don’t necessarily agree with William Blair analyst Kamil Mielczarek’s pessimistic outlook on Palantir, at least we can commend his colorful use of language.
Anticipating “further downside” in 2022, Mielczarek issued an “underperform” rating on shares recently. Reportedly, Mielczarek declined to suggest a price target for the stock.
So, why is the analyst so grumpy about PLTR stock? Apparently, it’s because government contracts — which are Palantir’s bread and butter — have been lumpy. Mielczarek outlined the following:
“We think Palantir’s recent government struggles are a function of the continuing resolution, elevated competition, the lumpy nature of government contracts, the lack of new COVID related work, and protracted procurement cycles for large contracts.”
I suppose Mielczarek is referring to the feast-or-famine nature of government contracts here. Duly noted. Still, though, it’s entirely possible these headwinds have already been priced into beaten-down PLTR stock.
Customer Count Climbing
In other words, PLTR stock investors have already taken their lumps, so to speak.
Besides, it’s not as if the company has lacked client accretion. During the third quarter of 2021, Palantir added 34 net new customers, while the company’s commercial customer count grew 46% quarter-over-quarter.
Furthermore, Palantir recently acquired some valuable government contracts. Among them was a $43 million contract extension from Space Systems Command’s (SSC) Cross-Mission Ground and Communications Enterprise. With that extension, the total cumulative face value of the contract increased to an impressive $91.5 million.
Moreover, the U.S. Army’s Program Executive Office for Enterprise Information Systems recently “opted to execute the second option year of its partnership with Palantir on the Army Vantage program.” That contract is valued at $116.3 million for the year — a whole lot of gravy with no lumps.
The Bottom Line on PLTR Stock
Palantir is somewhat controversial, so the company will always have its share of critics. As an informed investor, however, you can choose to take note of the criticism while also making your own decision on the company.
This company still has high-dollar contracts from government agencies as well as private businesses. Therefore, buying PLTR stock while it’s at a low point now should prove to be a sensible investment strategy.
On the date of publication, David Moadel did not hold (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.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
