Palantir Technologies (NYSE: PLTR) stock is gaining traction and may advance another 50% or more in the next few months. The company has a solid product, growing demand, deepening penetration and widening margins that can all be blamed on its utility. The company is the leading provider of data gathering and mining, using the platform to detect and prevent threats, internal and external, insight into efficiency, and product development. This company has everything except the analyst's support regarding the stock price.
For some reason, analysts continue to nay-say Palantir despite a solid Q4 report. The company reported better-than-expected revenue, accelerated growth on ramping up commercial business, and reversed a loss in the previous year, which should have lifted sentiment. As it is, the analysts began to lift their price targets but low-balled the technology stock and kept it pegged at Reduce.
Sell-siders underestimate Palantir … for a reason?
At face value, it looks like Palantir is overvalued, but it has been suggested by Keith Fitz-Gerals that sell-side money is trying to shake out weak hands. Keeping the price target low and the sentiment at Reduce, retail investors may get spooked and sell out the stock. In that scenario, the share price could plummet, providing an entry that has yet to appear. The Q4 results suggest that business will continue accelerating in 2024 and outperform arguably low-ball estimates for 2024.
The guidance for 2024 is good but also cautious. The company forecasts only 20% growth on top of 2023’s high-teen advance, which is discounting momentum and demand for AI services worldwide. The 30% growth in commercial business and expanding end markets are reasons to expect outperformance. Palantir is moving into health care, energy, and manufacturing, with nearly limitless applications. Competitors like Snowflake and Datadog are growing at much faster rates.
Analysts Sell, But Institutions Are Buying
Analysts have the stock pegged at Sell, but institutions are buying the stock. Institutions own about 35%, which is not a large amount, but their activity ramped in Q3 2023 and remained strong into Q1 2024 with no signs of slowing. The quarter-to-date tally for Q1 2024 has already surpassed the Q4 2024 tally and may continue strongly through the quarter's end. The largest holder is Vanguard Group’s collective holding at nearly 9%, primarily publicly traded funds, but ownership is broad and includes a significant amount of private capital.
HSBC downgraded Palantir to Hold following the Q4 release, citing valuation as a primary factor. However, trading at 16X earnings and expected (by HSBC) to grow at a 20%+ CAGR over the next four years, its valuation doesn’t appear to be a problem for most.
Ironically, analysts are lifting their price targets. Marketbeat.com tracks seven revisions following the Q4 release, including five boosted price targets and two upgrades, but consensus still lags the market. The consensus estimate assumes a 30% decline in the stock price, which is unlikely given the technical outlook.
The Technical Outlook: Palantir Confirms a Critical Pivot Point
The chart of PLTR stock is a textbook example of IPO pop followed by implosion, bottom and reversal. The bottom is marked by a Head & Shoulders Pattern and a ramp in trading volume that coincides with the FQ1 results in 2023, which proved the move to open services to commercial business was good. Since then, trading volume has remained elevated and lifted the price action by 175%. Now, Palantir has crossed a critical pivot point at the mid-point of its trading range and is heading higher following a continuation signal.
The next target for this stock is near $29 and may be reached by late spring. Assuming the market can advance above that point, the door is open to $38.50 and a retest of the all-time high. Assuming the Q1 results align with 2023 trends and the forecast for 2024, the market should have no trouble moving to a new high with or without analysts' support. If the news is good enough, the analysts change their tune and get on board this trade, and buying could accelerate again and move the price to a new all-time highs.
