Palantir's Upgrade Bonanza
Jan. 23, 2021 9:49 AM ETPalantir Technologies Inc. (PLTR)229 Comments198 Likes
John Rhodes profile picture.
John Rhodes
10.04K Followers
Bio
Follow
Summary
This article explains PLTR's recent strongly positive price action.
A combination of PLTR's Demo Day announcement and social media updates fueled an incredible one day price increase.
A barely-mentioned data point from a PLTR press release provides a peek into what investors could expect in the next earnings call.
A new long-term price target is provided in light of recent news.
PALANTIR LOGO
Setting The Table
No doubt, if you've followed Palantir (PLTR) then you've already seen this:
Above, I've given you the one month view. You can see the price starting around $28, dropping to $23, then exploding upwards to $32.
So, I think some people might be too excited by the 25% gain in one day. But, when I look at PLTR, I put on my long term goggles. Unlike day traders, I see the price moving from $28 to $32. That's good for a gain of about 12% in one month. Very good, but certainly not insane.
If you're going to look closely at one day only, then I think this is the far more important view.
I'd like to draw your attention to how incredibly smooth this looks. It didn't fight and claw from $26 to $32 in one day. Instead, that's practically a straight line, especially given this is such a huge one day gain.
Our Agenda
In this article, I'm going to reveal what triggered the massive one day price spike for PLTR.
First, I'll remind everyone of some of my previous key points to build a simple foundation. There are a few things that come up over and over. Let's just get that housekeeping done fast.
Second, I'll provide some color regarding social media influences, and content distribution. In effect, there's plenty of noise on Twitter and Reddit. There is also some "signal" buried in that content. I respect the energy.
Third, I'll really dig into the essential trigger. While some people are looking at the surface level, I'm going to speculate on diamond hidden in plain sight. It's not instantly obvious, but it is public.
Quick Foundation
I've written nine articles on Seeking Alpha about PLTR. I've been publicly bullish since early November 2020 but I was privately bullish much earlier. The most important message is that PLTR is likely to an outstanding long term investment. If you can look out more than 10 years, it feels inevitable. That said, here are some key points I've made previously.
Palantir Goes Boom -- "Beautiful positioning, smart marketing, right before our eyes." The point being, PLTR has done a great job with their marketing, and shaping the narrative.
Palantir's Biggest Competition -- "We compete against our customers, more specifically against our customers desire to build their own solution internally." Therefore, two things are at play. First, they need to fight to get traction to win. Second, traction can lead to serious compounding.
Palantir Not Dead After 17 Years -- "In the last 5 days, PLTR is up over 36%. On Friday, November 6th, it was up over 16%." In other words, I've tried to emphasize that I expect price volatility.
These might appear to be three random ideas but they are perfectly interlocked. PLTR's marketing is awesome but it's not appreciated. They're treated as being all secretive and closed. I disagree; see the PLTR blog that's updated openly and frequently. Their marketing is so good, that it's often hidden right in plain sight. And, true gems are left for anyone to pick up. Putting it all together, in addition to their recent public debut, the price is going to fly all over the place, up and down.
I think long term investors are best served to consider PLTR holistically. Perhaps said differently, it's best to consider that PLTR really does think it's the most important company in the world, and that it plans to survive and thrive for 100 years, or more. That might be strange, but I'm planting that seed.
I never just make these things up out of thin air. For example, directly from the PLTR S-1:
The stakes are high. The challenges our platforms address are a matter of survival, both for the institutions we serve and the individuals who depend on them. We have the privilege of partnering with some of the world’s most important government and commercial organizations. And we believe that the work of those organizations is essential to our security and the lives that we lead.
PLTR thinks about survival; anti-death. This applies not only to PLTR as a business, but also to their customers. In the true sense of "life and death", PLTR is looking out far beyond the immediate horizon.
PLTR takes their work seriously. It's not just money they're after, and I think that's compelling, even inspirational. It's a far cry from most of the typical milquetoast proclamations I hear. But, we need to press on, since I'm getting a bit too philosophical here. Let's get very practical now.
Social Media Lit Afire
Please scroll back up and reference the image showing the price rise on Friday, 22-January. You'll again see just how smoothly the price increased. That's exactly what Jim Cramer is saying here:
All buyers, no sellers.
And, while GameStop (GME), Bed Bath & Beyond (BBBY) and AMC Entertainment (AMC) got mentioned Jan. 22 in relation to Reddit users, the truth is the PLTR is one of hottest "meme stocks" on Reddit, especially over in the often hilarious WallStreetBets subreddit.
It gets better. PLTR is also one of the top stocks on Robinhood. As I write this, it's #75 out of 100 on the 100 Most Popular list. It's getting viewed, discussed, pushed, pumped, tweeted, blogged and more. PLTR is a story in and of itself.
So, here's how that all translates to volume. On Friday, 22-January, volume was quite high at about 156 million shares changing hands. This is far above the averages which you can see for yourself.
ChartData by
YCharts
However, a few other days had higher volume, which you can see more clearly right here:
Source: MarketChameleon
A word of advice: higher volumes have benefitted PLTR holders. So, I encourage those who accumulate to be looking for high volume days. I doubt this will always hold true, but my eyes tell me that higher volumes generally indicate that the price is going to be flat or rising, not falling. But, I digress.
My more important point is that social media chatter certainly added fuel to the fire. It's a place to sniff around for clues. Oddly enough, today there was very little posted about the big news. Furthermore, I would argue that this news isn't what it seems, and that there's something that really matters much more for investors - especially in light of the earnings report coming in approximately 3-4 weeks. Let's now shift gears to bring this all home.
The Demo Day Bombshell
Here's what landed: PLTR Issues Additional Details About Its Demo Day
And, as I was writing this, more details were shared here on Seeking Alpha. Here are some of the points made:
Palantir says the event will include the first public demos of the latest developments for its Foundry and Gotham software platforms.
After the bell yesterday, Palantir announced the addition of Lauren Friedman Stat to its board and audit committee.
Earlier this week, Palantir announced a new multi-million dollar deal with energy company PG&E.
These are all interesting points about PLTR and, of course, Demo Day. And, if we look more closely at the press release, it gets a bit clearer:
The event will also highlight Palantir’s modular strategy, including the announcement and demonstration of new software modules such as:
Software-Defined Data Integration ("SDDI"): to integrate with dozens of ERP systems in days
Low-Code / No-Code Environments: to deploy operational applications in hours
Archetypes: to start business use cases in a few clicks
AI-Enabled Mission Command: to support U.S. and allied nations in planning and executing missions
But, there's something even more important. It's in the press release, but there are no detailed implications, and there is no added analysis. Here it is:
In Q4 2020, Apollo managed 150,000+ upgrades per week across environments, up from 40,000+ upgrades per week in Q2 2020.
To me, this is an absolute bombshell.
In terms of rather simple math, PLTR has just told investors that business increased about 275%. Or, in more plain terms, business was up 4x in less than one year. (See my comments about "contribution margin" below.)
Now, I firmly believe that the vast majority of investors are excited about PLTR's software demonstrations and public revelations. I think that the announcement about the event is an event itself. I mean to say, very bluntly, that it's marketing about marketing. And, earlier in the article, I made it clear that PLTR doesn't get enough credit for their brilliant marketing. They are controlling the narrative, once again.
Furthermore, this announcement, combined with the social media traction, created a lovely self-reinforcing marketing loop. Investors who weren't thinking about PLTR were thinking about it again. And, investors got thinking again about PLTR's earnings. (But, they were quiet on PLTR's lock-up period.)
Wrapping Up With a Price Revision
Certainly there has been good news from PLTR in January 2021:
Palantir announces multi-million dollar deal with PG&E
Palantir delivering prototype for Army’s Ground Station modernization
Fujitsu signs $8M contract as Palantir Foundry customer
Palantir Technologies bags new $22.5M contract in Japan
But, I feel that the Demo Day news is especially powerful, and with a broad stroke, it's the reason that many investors pushed up PLTR by 25%. Hidden in that announcement, however, is something more important. A clear, strongly positive force at work, by way of product utilization and customer activity.
We know that PLTR is not only winning contracts, and collecting money, but it's also increasing "stick" which will translate to beating the internal competition I've previously outlined. Furthermore, this proves - again - that the longer PLTR can be part of the customer experience, the greater the impact they have. For once, getting older is wonderful; Lindy is real.
We'll find out soon enough how this translates to PLTR's contribution margin, which leadership has indicated in the S-1 as being critical to understanding the efficiency of their operations over time. This key business metric reflects how investments in growth, e.g., efficient upgrades, contribute to the bottom line. I'm looking forward to what comes next with PLTR.
I'll end with a price upgrade. Here's what I wrote on December 18th, 2020:
In the short term, I'm optimistic that PLTR will stay well above $15, and probably even $20, perhaps even through the lock up period. Then, if growth continues, and Q1 2021 is strong, I see a rational path forward to $50 in three years, or less. That's not aggressive enough for some people, but that's 100% in three years. Rounding this out, I think with PLTR's 30% growth projections in 2021, I'm already on solid footing. I'll put a $50 price tag on PLTR by the end of 2023.
In light of the outstanding progress in the last 3-4 weeks, plus investor reception to Demo Day news, I'm increasing my estimates. Depending on how the lock-up expiration plays out, and investor reception to PLTR's earnings, I'll update my price target and perhaps my timeline. I feel comfortable in saying that PLTR can reach $75 by the end of 2023. I remain very bullish on PLTR's long term business, and price.
I look forward to your comments below.
Don't forget to follow me so that you can receive a real-time email alert that one of my articles has just been published.
Disclosure: I am/we are long PLTR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.