- Palantize (PLTR) the stock is on track.
- Investors focused on shrinking its government business and ignored growth in overall revenue.
- If it can get back above $15, the trend could take it up 25% in the summer.
The pandemic has changed the world, especially Wall Street. Investors’ approach to stock trading may never return to the old ways. And a big part of that sea change is the influx of new retail investors. They had the inexperience, but it brought a new perspective on things. From there, stocks of memes emerged, including Palantize (NYSE:PLTR). It was more bad than good for PLTR stock investors.
The good part was that the meme stocks caught fire and the PLTR went up 370% in about a month. Unfortunately, it peaked 13 months ago and has been falling ever since. The rally was far too hot, which made it impossible to hold.
Palantir at its lowest last month had lost more than 77% of its value. Those who cast him out late are in a world of pain. Luckily, I was holding it before the mega-spike and took profits throughout this crazy rally.
But my prognosis today is that the PLTR stock is worth holding onto for the long term and not for its meme status. It has recovered some of the recent lows, but there should be a lot more gains going forward. Its business fundamentals are strong and it operates in the growing AI segment. Therefore, it is expected to have a high demand for years to come.
The scanning process speeds up exponentially. Humans will need artificial intelligence to process the data. Competition is not an issue as the process is still in its infancy. All legitimate vendors have room to thrive this early.
PLTR stock is in safe hands
Reaction to its latest earnings report has been disappointing. Investors focused on its deteriorating government business and seemingly missed the fact that overall revenue still rose more than 30%. Companies often change their sales composition – this is a sign of a competent team. Apple (NASDAQ:AAPL) does from hardware to services.
Adaptability sets a business up to sustain success for a long time. The company’s pedigree shows maturity beyond its relatively young life. Wall Street just needs time to figure this out.
Until then, PLTR dips are buying opportunities.
Technically, there is good news after hitting February lows. The deepest point occurred due to a market-wide correction following Russia’s invasion of Ukraine. The timing was unfortunate, as it hit after the negative earnings reaction. But since then, the bulls have established a series of higher lows. If its price soon exceeds $15 per share, PLTR stock may extend its rally another 25% into the summer. Over a longer period, investors should accumulate this stock in small increments.
Wall Street is too cautious on PLTR stocks
Palantir already has a successful business, so this isn’t your average stock of frothy memes. Wall Street investors don’t like high-growth, high-spend companies right now, but Palantir’s metrics are normalizing a bit. In fact, it now generates over $300 million in positive cash flow from its own operations. In an environment of rising interest rates, it is important not to have to borrow a lot.
The price-to-sales ratio of 15.8 suggests that investors in PLTR stocks now have realistic expectations. According to Yahoo Finance, the average price target is around $15.
Value will not be the reason investors should buy into it. At this point in the game, Palantir should be focused on deploying cash to drive growth. The profitability adjustment can come later. You just have to ask Amazon (NASDAQ:AMZN), netflix (NASDAQ:NFLX) and You’re here (NASDAQ:TSLA). You can’t build an empire by pinching pennies.
At the date of publication, Nicolas Chahine had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.