Palantir Technologies (PLTR) has been confusing investors.
The company broke off a strong set of results in late August. It then continued to push the results even higher and formed a bullish pattern. However, as soon as PLTR stock seemed to be ready to push further, it stalled.
The multiple rallies PLTR stock has seen in September have been met with yet more selling pressure. This is a company that’s come down dramatically from its peak earlier this year. Since trading as high as $45 per share, shares of PLTR stock have approximately halved at the time of writing.
This downside pressure on the Peter Thiel company has confounded many investors. After all, this is a relatively high-growth stock with a business model centered on generating government contracts. Such a company ought to be viewed positively by long-term investors.
That said, the company’s fundamentals and valuation have provided some investors with pause. I remain neutral on this stock right now. (See Analysts’ Top Stocks on TipRanks)
More Than Just a Meme Stock
Factually, parabolic runs cannot last forever. Trees don’t grow to the sky. Indeed, at some point, every meme stock will fall to its true fundamental value — such is the purpose of efficient markets.
While we debate whether a permanent dislocation to the efficient market hypothesis is possible or not, PLTR stock appears to be a stark example of the market re-rating a company on the basis of its fundamentals.
Indeed, Palantir’s revenue growth is quite notable. The company booked total revenue of $376 million this past quarter. This represented a year-over-year increase of approximately 49%. Additionally, the company added 20 new customers in the second quarter, providing 13% growth on this front.
However, on the bottom line, things aren’t looking so pretty for Palantir. This company has continued to churn losses each and every quarter, making some fundamentals-oriented investors concerned.
Amplifying Negative Narratives
Certain positive storylines about the company, like its assistance to intelligence agencies and policing groups, reinforcing counter-terrorism, etc., can quickly swing the media’s focus on negative narratives.
Currently, there’s some level of negative sentiment surrounding Palantir’s information gatherings from private citizens. In addition, some concern has built up around the company’s lawsuit against the U.S. Army for its attempt to create replacement software.
As a result, negative sentiment around PLTR stock has begun to outweigh any near-term social media-generated sentiment on this stock.
Whether this can continue remains to be seen. However, it appears PLTR stock is one highly dependent on social media sentiment right now. This is a factor that’s likely to contribute to more volatility, rather than less, on the horizon.
Wall Street’s Take
As per TipRanks’ analyst rating consensus, PLTR is a moderate sell. Out of six analyst ratings, there is one Buy recommendation, two Hold recommendations, and three Sell recommendations.
The average Palantir price target is $24.20. Analyst price targets range from a high of $31 per share, to a low of $18 per share.
Palantir’s stock remains expensive, from a fundamentals standpoint. This is a company that continues to bleed cash, and has a business model that, while enticing, hasn’t yet proven to be profitable.
However, the company’s top-line growth numbers are attractive. This is a stock that many believe can grow into its valuation.
Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article.
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