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Stocks  | November 3, 2020

Palantir (NYSE:PLTR) stock is controversial, contrarian and a breath of fresh air depending on who you ask. A read of the company’s Form S-1 Registration Statement quickly indicates that this company has positioned itself as the antithesis to everything tech culture. It is the anti-Silicon Valley software company. 

Palantir holds itself up as a company that will engage in the controversial business of providing software solutions to our most scrutinized Government agencies. This includes its prior involvement with organizations like U.S. Immigration and Customs Enforcement.

The company’s involvement here forces investors to ask why this vital — if controversial work — has been condemned by the masses. At the same time it questions why Silicon Valley culture and the business models upon which it operates are themselves so generally accepted. 

The world, or at least the United States, is becoming increasingly polarized almost by the day. And most pundits would characterize the defense and military industry as decidedly on the right of the political spectrum. In a sense, Palantir is the corporate embodiment of that. 

Palantir Has Strong Opinions

But individual politics aside, Palantir is laudable for at least challenging the status quo when the status quo has been as profitable as it has. I believe that alone will serve to drive more potential investors to scrutinize PLTR stock in the near future. The messaging does seem to be right on for the industry and customer base if overtly nationalistic.  

At the same, those investors want to know about how this company intends to turn around what have been less than stellar operations. Many of my colleagues at have written well-reasoned condemnations of Palantir. On the other hand, many have posed bull theses with plenty of logical, well thought out and persuasive arguments. But I believe that most of them would also agree that Palantir represents subjectivity in the face of objectivity as well as any stock.

That is, I think that Palantir is investible for some based on what it represents, not what it returns. Likewise, I believe many investors are bound to stay away no matter how much money this company ultimately returns.  

A Post IPO Look at PLTR Stock

Post IPO, PLTR stock has been relatively flat. The company has not moved much and investors are trying to understand why. But, investors will know more about the company, or at least have more by which to judge it, when Q3 results are released on Nov. 12. The company already released guidance for Q3 and the remainder of the year. It expects between 46% and 47% in Q3 revenue growth, and 41% to 43% for the entire year-to-year period.

As good as that top line growth sounds, it obscures the fact that the company has incurred losses in each year of its existence. Profitability is still a goal for the firm, and not a hurdle it has yet overcome.

In fact, if you follow the reasoning set forth by my colleague Mark Hake, Palantir may have every reason not to. His experience in government certainly lends credence to his argument. And ostensibly investors want those profits to show on financial statements leading to price appreciation. 

Winning Contracts

Amid all the controversy it’s also important to recognize the potential catalysts. If you’re an investor who hasn’t yet made up their mind about PLTR stock, here are a few things to consider.

Palantir has recently won two contracts which do bring it closer to profitability. On the first two days of October, the company announced that it had won $127 in contracts. The first contract is valued at $91.2 million over two years. It leverages Palantir’s Gotham and Foundry platforms for AI and Machine Learning for the Army. 

The second contract provides for the use of Palantir’s Foundry software for the National Center for Advancing Translational Sciences. It brings $36 million in revenue to Palantir. As important as revenue is, profitability remains paramount as well.

The Bottom Line on Palantir

But again, these objective benchmarks may not matter for this company. This company has been masterful in its messaging and positioning.

Palantir stated about our armed forces, “We have chosen sides, and we know that our partners value our commitment. We stand by them when it is convenient, and when it is not.” Palantir’s point is that there are lots of investors who are very willing to stand by this type of statement. They expect Silicon Valley to disparage such proclamations as jingoistic rhetoric. In fact, I imagine they welcome it.

That’s why I think PLTR stock has a shot to rise as a flawed contrarian. 

A revolutionary initiative is helping average Americans find quick and lasting stock market success.

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