To The Moon

On December 3, 2024, Palantir Technologies (PLTR) surged 7%, reaching a new high of $71. The catalyst? The company announced a significant new government security designation, enabling it to manage sensitive U.S. government workloads through its cloud offerings. This development reinforces Palantir’s position as a trusted partner in AI-powered analytics and national security.

With its share price nearly doubling since early November, investors are now asking: Is Palantir the next AI multi-bagger? And more importantly, should you hold PLTR for the long term?

Why This News Matters

This latest milestone strengthens Palantir’s core competitive advantages:

1. Government Contracts: Palantir’s stronghold in government work, including defense and intelligence, now expands further into sensitive cloud workloads. This security designation could lead to larger, longer-term contracts with the U.S. government.

2. AI Integration: Palantir is uniquely positioned at the intersection of AI and big data, areas critical to government and enterprise sectors alike.

3. Revenue Growth Potential: This designation could unlock additional revenue streams, solidifying the company’s double-digit growth trajectory.

The Case for Palantir as a Multi-bagger

1. AI Leadership

Palantir’s Foundry and Apollo platforms are leading AI solutions tailored for large-scale, mission-critical operations. With AI adoption accelerating across industries, Palantir is positioned to capture both enterprise and government demand.

2. Expanding TAM (Total Addressable Market)

The combination of its existing expertise in data analytics with the growing need for secure cloud solutions significantly broadens Palantir's TAM. The U.S. government alone represents billions in untapped opportunities.

3. Profitability Milestone

Earlier this year, Palantir became GAAP profitable, a key shift that separates it from other high growth but unprofitable tech companies. This financial stability bolsters the bull case for long-term growth.

4. Nasdaq-100 Inclusion

After its recent move to the Nasdaq, Palantir’s inclusion in the Nasdaq-100 index has increased institutional ownership and liquidity. This influx of passive investment may continue to support the stock.

Risks to Consider

1. Valuation Concerns: Trading at $71, Palantir’s valuation reflects significant growth expectations. Its price-to-sales ratio is above 60, leaving little room for error.

2. Execution Risks: As Palantir expands into commercial markets, execution challenges could arise, particularly in scaling its sales efforts.

3. Geopolitical Sensitivities: Palantir’s reliance on government contracts exposes it to potential policy shifts and budgetary constraints.

How I’m Positioning

As a quantitative trader and investor, I balance long-term conviction with tactical plays. Here’s how I’m approaching Palantir:

1. Holding a Core Long Position

I view Palantir as a top-tier AI stock with multi-bagger potential over the next 5-10 years. I’m holding my core position for long-term growth, especially with its leadership in AI-enabled government solutions. However, I would refrain from adding at $71 and instead look for pullbacks below $60 for incremental buying.

2. Leveraging Options for Upside

To capitalize on short-term momentum, I will initiate a bull call spread:

• Buy $75 Calls (Feb 2025 Expiry)

• Sell $85 Calls (Feb 2025 Expiry)

This strategy limits my risk while allowing me to benefit from a potential move toward $80-$85.

3. Protecting Against Volatility

Given the sharp run-up, a pullback is possible. To hedge against downside, I will enter a bear put spread ($70/$65) for the next 1-2 weeks, protecting gains from any near-term profit-taking.

Price Targets

• Bull Case: $85 (continued momentum fuelled by government contracts and AI adoption).

• Base Case: $75 (moderate consolidation with strong fundamentals supporting gradual gains).

• Bear Case: $60-$65 (profit-taking or broader tech market correction).

Conclusion

Palantir’s recent high of $71 underscores the market’s confidence in its growth potential. With its deep integration into AI, government, and now sensitive cloud workloads, Palantir is not just a short-term winner—it’s a strong contender for multi-bagger status. While the current valuation demands caution, the long-term narrative remains compelling. For now, I’m holding, hedging selectively, and keeping a close eye on opportunities to add during pullbacks.

If you believe in AI’s transformative potential, Palantir deserves a place in your portfolio—but position with care and please DYODD!