To The Moon

Crowning of a king pin stock - Palantir ?

I’m about to post about $Palantir Technologies Inc.(PLTR)$ (again), one of my favorite stocks this year.

I have a handful of posts about this AI company. Click to read, if you like.

• 01 Nov - PLTR : Messi of Artificial Intelligence ? share price $44.86.

• 12 Nov - 2025 Top 5 - NVDA, PLTR, TSLA +... To Invest. share price $58.39.

• 16 Nov - PLTR will BOOM! with switch to NASDAQ ? share price $65.77.

• 21 Nov - Will PLTR & META Tie-Up Sparks Rally ? share price $61.36.

Palant-astic 2024?

PLTR has a fantastic run this 2024.

Just November alone, it has gained +49.53% to end on a high $67.09 per share.

YTD it has gained +360.43%.

Now, exploring the possibility of PLTR hitting $80 a pop. Possible ? Let’s find out!

PLTR is an artificial intelligence (AI)-powered tech stock that has captured Wall Street's imagination in 2024, with a respectable market cap of nearly $150 billion.

The company went public in September 2020 at $10 a share. It has since generated returns of +729.78%. Super !

Core Businesses.

Palantir builds and deploys software platforms for governments and companies in the US and other international markets.

Its products include:

• Palantir Gotham: A platform allowing users to identify hidden patterns within deep data sets. It helps operators plan and execute real-world responses to threats identified within the platform.

• Palantir Foundry: A platform that disrupts how enterprises operate as it creates a central operating system for their data, which users can integrate and analyze in a single place. 

The Questions ?

The overriding questions on everyone’s mind :

• Is PLTR overvalued after its breakout rally this year ?

• Can PLTR continue moving higher over the next 12 months ?

Read on to find supporting evidences to the 2 questions.

Q3 Earnings & Q4 Estimates. 

Strong Q3 Performance.

Palantir shares jumped +20% following its solid Q3 earnings results:

• Earnings per share (adjust) EPS : $0.10 per share vs $0.09 Wall Street consensus. (see above)

• Revenue: came in at $726 million vs $701 million Wall Street expectations. (see above)

• Sales have risen by +30%.

• GAAP net income of $144 million, representing a +20% margin and has more than doubled YoY.

Palantir, CEO, Alex Karp has shared:

• Its revenue beat in Q3 was largely due to “unrelenting AI demand that won’t slow down”.

• There is strong adoption of AI solutions from the US government base. 

Q4 2024 Outlook.

• Projected revenue would be between $767 million and $771 million.

• Comfortably surpass Wall Street’s consensus estimates of $741.4 million.

• Adjusted income from operations of between $298 - $302 million.

• Expects total sales to grow by +26% YoY to $2.81 billion, beating estimates of $2.76 billion. 

Challenges.

PLTR is on target to generate $687 million in sales in US commercial segment for 2024. This will be a +24% YoY gain.

However, sales outside the US fell by -7% when compared to the previous quarter.

This is due to (a) lower demand from European businesses and (b) a decrease in sales to a government organization in the Middle East

Overvalue ?

Palantir’s outsized gains in 2024 can be tied to an improving bottom line.

In the last 12 months, its net income has risen to $476.6 million, up from $209.8 million.

Comparatively, it reported cumulative net losses of over $2 billion between 2020 and 2022. 

The AI software company has reported a positive free cash flow (FCF) since 2021.

Its free cash flow in the last 12 months has totaled $980.3 million, up from $321.2 million in 2019.

Analysts expect its FCF to rise to $1.16 billion in 2025 and $1.5 billion in 2026.

Further, analysts expect earnings to expand from $0.25 in 2024 to $0.6 in 2026.

So, priced at 110x forward earnings, PLTR stock trades at a lofty valuation. 

Despite that, $Bank of America(BAC)$ :

• Recommended PLTR a “Buy” rating and raised its price target to a new Street-high of $75 from $55.

• Explained PLTR’s growth in US markets and a widening competitive moat make it a top investment choice as it now serves a wide range of clients across sectors. 

• Projects its Government business to grow annually by +29% over the next 3 years, up from 24%.

• Believed PLTR is well-positioned to digitize business processes as companies turn to AI and automation to boost profitability.

• Expects its Commercial business to grow annually by +34% over the next 3 years, up from earlier forecast 32%, due to rising demand. 

Other Analysts’ Ratings.

However, BofA's bullish opinion is a rare one for Palantir.

Out of the 15 analysts covering PLTR stock :

• 2 recommend a “Strong buy”.

• 6recommend a “Hold”.

• 7 suggest a “Moderate sell” or “Strong sell”.

The average target price for PLTR is $33.78, indicating a downside of almost -49% from current levels.

In contrast, BofA's new $75 target implies expected upside of +11.68%, based on 29 Nov 2024 closing price (see above).

Technical Analysis.

The bullish sentiment isn't just talk.

At $66.05, is flying high above all its major moving averages:

• 8-day SMA: $63.56

• 20-day SMA: $58.00.

• 50-day SMA: $47.68.

• 200-day SMA: $31.14.

• Above technical signals underscore a strong uptrend.

• PLTR’s Moving Average Convergence Divergence (MACD) at 5.51, is another indicator of a buying opportunity.

• However, PLTR’s Relative strength index (RSI) of 73.03, indicates it is just-in Overbought territory.

My viewpoints : (mine only)

I like to assume that BofA’s supposedly high price target is due to its factoring of PLTR inclusion in the coming Nasdaq-100 reconstitution.

This has been covered in my post dated 16 Nov 2024 - click here ! to read.

Nasdaq-100 Inclusion?

• The NASDAQ 100 reconstitution has kickstarted on 29 Nov 2024.

• The inclusion algorithm is supposed to be based on Market cap rankings of non-financial companies trading on the Nasdaq Exchange, amongst other ‘less influencing’ factors.

• The new list of stocks will be announced on the second Friday of December, that is 13 Dec 2024.

• Should PLTR be included in the new list, it will impact passive funds that tracks and replicate the Nasdaq index.

• The 3 prominent funds impacted will be (1) $Invesco QQQ(QQQ)$ , (2) $INVESCO ESG NASDAQ 100 ETF(QQMG)$ and (3) $Global X Nasdaq 100 Covered Call ETF(QYLD)$.

• All 3 funds will be expected to purchase PLTR by 20 Dec 2024 to accurately track the NDX.

• Collectively, that is $360 billion of AUM, excluding any other NDX-tracking fund.

Example of Capital Inflow.

Based on Fri, 29 Nov 2024 closing price, PLTR has a Market cap of 150.463B

SNPS as example:

• The current 42nd spot in Nasdaq is occupied by Synopsys Inc. (SNPS).

• It has an $85 billion market cap (about 76% smaller than PLTR).

• SNPS currently occupies 0.55% of the Nasdaq portfolio weightage.

• 0.55% of $360 billion works out to be about $2 billion.

Logically, PLTR weightage in Nasdaq-100 should be ‘larger’ than SNPS’s 0.55%.

Conservatively, using simple ‘direct proportional’ mathematical calculation, (1.76% x $2 billion = $3.52 billion) will be how much capital will flow into PLTR from QQQ, QQQM, and QYLD alone.

Ignoring all companies that maybe included in the revised Nasdaq-100, hypothetically PLTR (if included) should sit somewhere between Honeywell (HON)$ and Applied Materials (AMAT)$., that is position #28. (see below for visualization)

Can you visualize the price target of $80 per share now ? Can you also visualize if PLTR failed to make it to the list ? Food for thoughts.

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• Do you think it is worth the while to sit on PLTR until after 13 Dec 2024 ?

• Do you think the 3 funds will know of PLTR inclusion in Nasdaq-100 before official announcement so that they have sufficient time to load up on PLTR ?

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