BY MARK SEBASTIAN
May 9, 2024
TRADE IDEA
Each week, my team will give an overview of a stock. I’ll discuss fundamentals, Licia will analyze the charts, and AG will break down the volatility.
Have a stock YOU want us to review? Email my team here. – Mark
Hey Trader,
The AI revolution is upon us!….allegedly. The earnings in Q1 didn’t seem to show it. A name that has still had a nice year but took it on the chin at earnings is Palantir. At 21.50 a share, this is not an expensive AI stock to own…so should you? Read on….
An option term got you down? Check out our Glossary here.
Palantir Technologies Inc (Ticker: PLTR)
Palantir is a leader in AI, mostly on the back of government contracts. The company is currently worth 53 billion dollars … .It only does 2.3 billion in Revenue.
Now before you say…well that’s a deal breaker…this is a startup that MAKES MONEY….
PLTR earned almost 300 million dollars…for a relatively short lived company that is not bad.
They have positive cash flow and aren’t over employed having only 3700 employees.
But, the PE…it’s 198.74. They are going to need to show that they can take the current revenue and increase it by about 18 fold to have a reasonable PE.
On a positive note, PLTR has very little debt…this means the money they are making is actually money…if you believe in PLTR, the lack of debt is huge.
Looking at PLTR, I think this looks a lot like a wait and see.
Any company that relies on the government for money is going to either do great (see NOC and GD) or fall by the wayside (see any number of smaller companies that pissed off a Bird Colonel).
Knowing what they do … .it’s probably a good buy…but I don’t love it…
-Mark
Palantir Technologies (Ticker: PLTR) debuted on the NYSE on September 30, 2020 and traded around $10.
Shortly after, in January 2021, it peaked out at $45.
It continued its downtrend until May 2023 when after its earnings report it caught a bid taking it from $7.75 to $20 by August.
Since then it has been trading in a range but the range has shifted higher:
The bottom of the new range, where it is trading now since their latest earnings report, is the top of the old range making it support and is right at my median line (red line), also support.
If PLTR can hold here and reverse higher, I am bullish.
Yesterday’s candle does look like it could become a dragonfly doji signaling a bottom.
Look for a close above $22 and PLTR will close the gap trading up to $24 and then the previous high at $25.40.
Support comes in at the most recent lows $20.38.
I am adding this to my watchlist.
Licia
PLTR tends to have very long flat vol cycles
As you read along, PLTR is an AI tech company but also a big government contractor. That means they have long quiet periods before earnings where the IV hits the floor and stays there. Post earnings this week is no exception.
Note the drop in IV to year lows on the 30 day cycle below. Every cycle out to 90 days looks the same and is at year lows. The easiest trade is just a put diagonal calendar into the lower IV.
PLTR 1 Year Chart
The stock looks like it trades more like a slow mover than a dynamic tech company but that is what it is. Once the calendars make some dough, buy a cheap call or two.
-AG
Palantir is one of those companies that is everywhere and nowhere, doing everything and nothing at the same time.
They are an industry enigma.
But at conferences they always have one of the biggest and most centralized booths … which is a telling sign of the amount of business they are doing with the government.
They were always known for their cyber offerings.
The two hottest topics in the military are mess networking (think drone swarm integration) and AI, which is the future of the battlefield.
PLTR does both. Specifically, they create data and communication integration across disparate systems.
If communication and coordination does not occur across branches and systems, the battlefield will be internally chaotic and inefficient.
PLTR will look to prevent that outcome.
They also apply that AI technology to the private sector to help companies optimize logistics, supply chain and inventory operations.
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Questions about anything? Leave a comment below!
Mark Sebastian
Founder & CEO, Option Pit
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