Despite prevailing pessimism surrounding Palantir Technologies (NYSE: PLTR), the company has remained resilient. Its stock has seen a remarkable surge of nearly 50% year-to-date and over 200% in the past year.
Following its earnings announcement, PLTR’s stock has been consolidating within a narrow range for the past two months. Despite being among the lowest-rated stocks and facing significant short interest along with insider selling, there are bullish technical indicators amidst the bearish sentiment. This juxtaposition suggests the potential for further upward movement in PLTR’s stock price.
Given this scenario, it’s important to analyze both the fundamentals and technical aspects of PLTR to gauge its potential for higher prices.
What is Palantir Technologies?
Palantir Technologies, established in 2003 by notable investors Peter Thiel and Stephen Cohen, is a Software as a Service (SaaS) company headquartered in Denver, Colorado. Its primary objective is to innovate within the realms of artificial intelligence (AI) and big data analytics, with the overarching goal of augmenting human intelligence.
Initially focused on providing solutions for federal government applications, Palantir has since expanded its reach to cater to state, local governments, and private corporations. The company offers a suite of solutions including Palantir Gotham, Apollo, Foundry, and Metropolis, with Gotham being its flagship product. Palantir Gotham specializes in aggregating vast and disparate datasets to facilitate rapid decision-making processes. However, it has encountered criticism, particularly concerning applications like “predictive policing.”
Another notable offering from Palantir is Apollo, which has garnered recognition from the Department of Defense. Apollo provides secure internet access across various operating environments, thereby expediting software development and deployment procedures for its users.
On February 5, Palantir released its quarterly earnings report, revealing an earnings per share of $0.03 for the quarter. While this figure missed the consensus estimate by one cent, the quarter’s revenue stood at $608.35 million, surpassing analyst estimates of $603.48 million. Palantir currently boasts a market capitalization of $55.87 billion.
The Bearish Sentiment
The sentiment surrounding Palantir Technologies’ stock remains firmly bearish, marked by a combination of factors such as a low rating, forecasted downside, healthy short interest, and recent insider selling.
Analyst sentiment towards the stock has been consistently negative, with a “Reduce” rating persisting for over a year based on 12 analyst ratings. Additionally, the consensus price target for the stock sits at $18.21, indicating a potential downside of nearly 28%, the largest predicted by analysts in over a year. This pessimistic outlook reflects concerns among analysts regarding Palantir’s future performance and valuation.
As of February 29, Palantir has maintained steady short interest, with approximately 97 million shares, representing around 4.39% of the float, being sold short. Despite a slight month-over-month decrease in short interest, the levels remain significant. The substantial dollar volume sold short, currently valued at $2.43 billion, underscores the notable interest among investors in betting against the stock’s performance. Such high levels of short interest suggest a widespread skepticism or bearish sentiment regarding Palantir’s future prospects.
In addition to the skepticism from analysts and short sellers, Palantir has witnessed a notable trend of insider selling over the past 12 months, with no instances of insider buying recorded during this period. A total of 11 insiders have collectively sold stock amounting to $280.24 million. Particularly significant is the insider selling activity in the first quarter of this year, totaling $184 million. Notably, Director Peter Thiel executed a substantial sale of 7,044,756 shares on March 12, amounting to $174,639,501. This transaction adds to the broader pattern of insider selling and underscores the significant divestment of ownership stakes by individuals within the company. Such insider activity can influence investor sentiment and market dynamics, contributing to the prevailing bearish sentiment surrounding Palantir’s stock.
Amidst Bearish Sentiment, the Chart Remains Bullish
Despite the prevailing bearish sentiment, characterized by the “Reduce” analyst rating and notable insider selling, a technical analysis perspective suggests a potentially bullish outlook for Palantir Technologies’ stock. Following its earnings report, the stock has undergone a two-month consolidation period, remaining above rising Simple Moving Averages (SMAs) within a narrow range.
This consolidation phase, coupled with the stock’s ability to maintain levels above the SMAs, indicates underlying strength and resilience. Should Palantir’s stock successfully break out of this consolidation phase and surpass resistance levels, particularly around the $27 mark, it could signal the onset of significant upward momentum.
Breaking above resistance levels could trigger buying interest among investors, potentially leading to a surge in buying activity and driving the stock price higher. Such a breakout could also attract technical traders and momentum investors, further fueling upward momentum.
In summary, despite the bearish sentiment prevailing in the market, the technical analysis suggests that Palantir’s stock is poised for a potential bullish move if it can break out of its consolidation phase and surpass key resistance levels. As always, investors should monitor price action and market developments closely to gauge the stock’s trajectory accurately.