Palantir (PLTR) Shakes Out the Weak Hands on Analyst Theory.. What's Next?

Palantir Technologies (PLTR) has seen a strong run in 2023, with its stock price up 190%. However, a recent bearish analyst note from William Blair's Louie DiPalma has raised concerns over the renewal of a $458 million Army contract, potentially impacting the stock's momentum. In this article, we will examine the growth potential and investment value of PLTR stock, considering fundamental factors, technical specifics, current market data, and the insights of bulls and bears.

Palantir Technologies generates nearly 60% of its revenue from government agencies, primarily using its data analytics software for intelligence gathering, counterterrorism, and military purposes. The company offers three platforms: Palantir Gotham, Palantir Foundry, and Palantir Apollo. These platforms enable users to identify patterns, analyze data, and deploy software in various environments.

The company went public in 2020 and is currently covered by 14 Wall Street analysts, with an average rating of Hold. PLTR trades at a market cap of $40.04B and an enterprise value of $36.99B. The stock has a forward P/E ratio of 69.44, which is above the S&P 500's current forward P/E of 18.7.

Bulls argue that Palantir benefits from strong secular tailwinds due to the rapid growth of the AI/ML market driven by the exponential increase in data harvested by organizations. They also highlight the firm's distributed top line, with noncyclical governmental revenue insulating the firm's top line during lean times. Furthermore, bulls suggest that Palantir's focus on modular sales could lead to substantially more commercial clients, which the firm could subsequently upsell.

On the other hand, bears point to the company's self-restriction of growth opportunities by not selling to countries or companies that are antithetical to Palantir's mission and cultural values. They also express concerns about the company's path to GAAP profitability, noting that it may take several years to achieve. Additionally, bears highlight questionable strategic decisions made by the executive team in the past, which they consider a cautionary tale for potential investors.

As of April 17, 2023, PLTR stock is trading at $21.34, down from its 52-week high of $28.60. The stock's relative strength index (RSI) is at 45, indicating that it is not overbought nor oversold. The moving average convergence divergence (MACD) line is above the signal line, indicating a bullish trend.

On April 14, 2023, William Blair analyst Louie DiPalma published a note questioning the future of a four-year, $458 million Army contract set to expire. DiPalma speculated that the Army might offer a new two-year renewal for $116 million, with Palantir's revenue reduced by additional vendors sharing in the deal. He also raised concerns about data ownership between the Army and Palantir, as the latter aims to use customer data to train artificial intelligence models.

Barron's published an article on April 17, 2023, stating that the William Blair note could take the wind out of PLTR stock.

PLTR shares recently took a shot at breaking back out above the key $20 level, which was a barrier for the stock in July and August following its rapid ascent in May, June, and July--a three-month stretch that saw the stock blast higher by nearly 175%. Monday's drop was a retreat back under that key level. The 50-day MA is rising up under the current action and could provide key support under the $18 level if selling carries over this week.

Palantir Technologies faces headwinds concerning the renewal of its $458 million Army contract and potential data ownership issues. However, the company's strong secular tailwinds, distributed top line, and focus on modular sales remain bullish factors. Investors should carefully consider both the growth potential and risks associated with PLTR stock, weighing the insights of bulls and bears.

Please note that this analysis is not a guarantee of future performance and serves only as an informational guide. It is essential to conduct thorough research and consult with a financial advisor before making any investment decisions.$PLTR(PLTR)