Worth the Hype? Palantir (NYSE: PLTR) - TA, FA, QA
Before we start, as this blog gains more readers, I must emphasize the disclaimer again that this is neither a recommendation to purchase or sell any of the shares, securities or other instruments mentioned on this website/blog, in any of the articles and/or documents be treated as professional advice to buy, sell or take any position in any shares, securities or other instruments.
If you're an active trader, you would have come across Palantir by now. Either from the WSB Threads, or their CEO delivering his press conferences.
Make no mistake, there is certainly alot of hype but is this company truly something that is worthwhile? Could it be a complete flop like so many before it or are we at the humble beginnings of a new tesla?
For those of you who follow me, you'll know that for the most part I am a dedicated technical trader but just for Pltr, we're going to look at this company from the fundamental and qualitative point of view.
First and foremost, what is Palantir and what do they do?
This is something that has puzzled me for a long time but rest assured everyone I have watch TONS of videos of what this company actually does so I'm in a really good position to narrow it down for you.
With ample information out there and many videos setting ridiculous price targets to this company, here is one that I recommend. This video is more informative than someone telling you this stock will 10x in 10 years.
In this video, Eric explains quite clearly what Pltr does and he also goes abit into some of his accumulation levels and technical targets for the stock. I like Eric very much as he is very objective in his analysis.
I'm no expert in FA but at the very least, we should look at how this company has been managing its expenses and revenues quarter on quarter.
Lets look at revenue, from this chart we see an uptrend which is good thing. We also see a good mix of revenue from both commercial and government contracts. From the video above you be able to deduce that any government revenue will likely be from Gotham and any commercial revenue would like come from Foundry. Also good to note that their revenue is not just from the US even though most of the media would portray it as such. They do have revenue from various regions around the world.
The only "problem" here is that along with increasing revenues, expenses has also increased significantly. As Eric pointed out in the video, most of the expenses are to do with increased labor cost as they increased their sales staff from 30 to 100. In the diagram below we can see that their GA&E went up by almost 2x.
It is difficult to deduce at present if the increase in labor cost for the sales department would pay off in the long run so we'll have to wait and see. I will be monitoring this space closely as 100% increase in labor cost definitely raises some red flags.
It is important to note that this company is NOT profitable at the moment so this is also another red flag. Needless to say it is burning cash at the moment to keep its operations afloat but so long as their revenues continue to increase and the company continues to grow, I don't see this as much of a problem
This is where your 10x videos come in and how everyone is so bullish on forums and in the media etc. No need to search too deep, just type in Palantir Stock Target on Youtube and you have these lofty price targets on the stock. Honestly, talk is cheap and there are so many people with bull arguments on this company which more often than not makes me wonder if life is really so easy that this stock can 10x or more in 5 years.
All this noise aside, there are 2 qualitative indicators I find worthy of mention. The first is how their CEO always says that this stock is not for "short-term" investors. He has said this more than once and this is probably the reason why the price action of this stock is not moving at the moment.
Does he need to say stuff like this on the media? Is it good or back for the stock? You decide.
The other qualitative indicator would be how ARK has been buying the dip on PLTR throughout this entire period. In the case of ARK, there is only for or against, hardly any middle ground. Based on their purchases, I would actually consider a move with much conviction as to how ARK see's the potential of this company.
Last but not least, and my favorite, Technical Analysis. Buy or don't buy? Can it be cheaper?
I've been unable to pick up any bullish momentum of any sort based on the Candlestick Patterns, MACD and Ichimoku Cloud.
MACD - Based on the basic principles of the MACD, the stock is currently below the 0 line which indicates that is bearish. The frequent convergence and divergence of the DIF and DEA only goes to show the level of indecision which investors for this stock are experiencing at the movement.
Candlestick Patterns - I believe that the price action is currently in a range of between $20 to $28 (Indicated in Grey) . Any price action which breaks below or above this channel would be considered a strong indicator of where this stock may be heading in the near term. As a short term indicator, I would consider the near term support/resistance level to be right where we are now at the levels of $22 - $25.
Ichimoku Cloud - As this is a relatively new stock which has been listed for less than a year, I will need to rely on the 4h chart to get a good read on this indicator. Based on my interpretation, the stock is still currently bearish as we have now just entered the Kumo cloud. Convergence of Tenkan-sen and Kijun-sen can be seen as bullish indicators but I would not consider this a convincing signal to go long. (Doesn't mean I can't nibble). As with the basic principles of the Ichimoku Cloud, we should wait for clearer indicators such as price breaking above the cloud or the Chikou Span breaking above the current cloud.
I am vested in Palantir but I'm in this with the mindset that I won't be selling it anytime soon. I'm in this without a stop loss and will only consider selling if the fundamentals of the company change.