By Nigam Arora & Dr. Natasha Arora
$200 Trade Magnet
$200 is the magnet for traders. PLTR is trading at $186.44 as of this writing. PLTR is long from an average of $20.15. This represents an 825% gain.
AI Efficiency
Palantir’s (PLTR) CEO Alex Karp recently announced that in a “crazy efficient revolution” the company is aiming to grow revenue 10 times, while cutting headcount by more than 10%. Karp said, “…we’re using AI and our platforms to do more with less.”
Margins
If Palantir succeeds, its already high gross margin of about 81% will likely go over 95%.
Revenue Increase
A tenfold revenue increase will lead to $34.4B in revenue.
$1 Trillion Valuation
As Palantir grows, it will not sustain its present P/S ratio of about 124. Assuming a modest P/S of 30, Palantir will be worth over $1T. If future growth at that time still appears rapid, due to high margins, a P/S ratio of 60 is not inconceivable. This scenario will lead to a $2T valuation.
High Risk
Most investors do not appreciate the high risk in PLTR stock. Here is what prudent investors need to know:
- Anytime a company has such high margins, competition almost always develops, bringing margins down.
- A raging bull market like we are in now sustains a high valuation, but if a bear market develops, a high valuation stock, such as PLTR, can be cut in half.
- Palantir is attempting to do something never done before. There is a high probability that it will not work.
- Sentiment is extremely positive. This is like everyone being on the same side of the boat. The boat floats fine as long as there is no storm, but if there is a storm, the boat can capsize.
Zones
For those following the Good Way, the Buy Now rating is *** (To see the locked content, please take a 30 day free trial).
For those following the Best Way who are also very aggressive, the buy zone is $*** – $*** to scale in.
For those following the Best Way who are not aggressive, a more conservative buy zone will depend on market conditions.
The recommended quantity is ***% – ***%.
The target zone is $439 – $458.
This is a very long term position.
What To Do Now
Those with a PLTR core position may consider continuing to hold and watching for a trade around position signal.
Those not in PLTR may consider waiting for a dip in the buy zone or signal for a new trade around position.
Trade around positions are a technique used by hedge funds and billionaires to increase returns and reduce risk. Please read Trade Management Guidelines to read about trade around positions.
Remember, given the high risk, the first line of defense is controlling the quantity.
Note: Signal(s) to enter, add, reduce, exit, hold or change.
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This post was published last week on ZYX Buy Change Alert.
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Nigam Arora
Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.
Dr. Natasha Arora
Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.
