If you feel like you’re missing out on Palantir (NYSE:PLTR) then I have several suggestions for you, plus some concrete and actionable advice.
First, to set the table, here’s a quick review of what I’ve written about PLTR so you clearly understand how I think about the company:
I’m also letting you know that I’m long on PLTR and therefore I’m biased. However, I’m very open to hearing arguments from the short side.
Second, here’s the most recent, up-to-date institutional ownership news that appears to be driving the stock price upwards:
Third, since the direct listing, PLTR has gained analyst coverage from:
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- Morgan Stanley (equal weight)
- Jefferies (buy)
- RBC Capital (sector perform)
- Goldman Sachs (neutral)
- Morgan Stanley (equal weight)
- Credit Suisse (neutral)
Here’s a sample of what they are thinking:
- Jefferies analyst Brent Thill initiated coverage of Palantir Technologies with a Buy rating and $13 price target. The company’s data platform is “highly unique and often deployed for mission-critical use cases that no other vendor can address,” Thill tells investors in a research note. He believes Palantir’s “more repeatable” new logo ads can broaden its reach to support 30%-plus growth with growing profitability. (source)
- Goldman Sachs analyst Christopher Merwin initiated coverage of Palantir Technologies with a Neutral rating and $10 price target. With just 125 customers today, “lumpy” deals, and limited visibility into future pipeline conversion, Palantir will likely trade at a discounted multiple relative to comparable growth peers, Merwin tells investors in a research note. (source)
- RBC Capital analyst Alex Zukin raised the firm’s price target on Palantir to $15 from $11 but keeps a Sector Perform rating on the shares. The company delivered a “strong” Q3 results with a 9-figure customer contract renewal and a number of 8-figure deals across government and commercial sectors, the analyst tells investors in a research note. (source)
It doesn’t hurt that
Source: Yahoo Finance
There’s a lot of momentum for PLTR right now. Its first earnings report went over very well. We’re finding out that “whales” like Soros, Cohen and Cathie Woods gobbled up PLTR last quarter. Plus, it’s obvious that Wall Street is now paying close attention because they’ve now initiated coverage, and provided their opinions, as I’ve referenced quickly above.
As I’m writing this investors might feel like they’ve missed out. There’s certainly the potential fear of missing out “FOMO” with PLTR. When you see a chart like this, that’s understandable:
I’ve now said several times that I expect volatility with PLTR. In fact, in full disclosure, I expect significant volatility. That said, I have no idea if PLTR will drop back to $15, $12, $10, or below. It’s entirely possible.
What’s An Investor To Do?
First, I am not interested in shorting PLTR. Therefore, I cannot provide any good advice or guidance on price points, or when to buy or sell. As I indicated up front, I am interested in the long game.
Second, for investors who bought earlier, perhaps at $9, $10, or $12, and who are short term oriented, this wouldn’t be a bad place to trim or take some money off the table. It’s an opportunity to lock in 20%, 30%, 50% gains or more in very little time. However, I am not interested in selling for short term gain with PLTR.
Third, I believe that investors who buy here, with a long time horizon, e.g., three to five years, or more, could easily acquire PLTR for under $20 and enjoy substantial gains. I expect significant volatility along the way, but with PLTR’s growth projections, there ought to be a reasonable staircase upwards in price to reflect the growth.
Investing in PLTR Via Options
There is another way to invest that could work well for some investors. This isn’t for the faint of heart, or for those investors with low risk tolerance. Instead, we’re exploiting leverage via PLTR options.
I’m going to let the cat out of the bag and show exactly what I’ve done. To be perfectly clear, this isn’t theoretical. I have skin in the game.
I bought PLTR Jan 20 2023 10 Calls. Let me break this down:
- PLTR is obviously Palantir
- January 20, 2023 is the expiration date
- 10 is the strike price ($10)
Grabbing “1” of these calls is like grabbing control of 100 shares. My cost was $9.81 per share ($9.81 x 100 shares). Therefore, each contract cost just under $1,000. In effect, I paid $9.81 to control each PLTR share worth $10. That’s a fast way to think about it.
Just in case you’re wondering, at the time I bought these calls, PLTR was trading around $15.50, give or take a few pennies. So, that’s like saying that I expected PLTR to go up at least $4.31 to $19.81 before January 20, 2023. Or, stated differently, that I expect PLTR to go up by 28%, roughly speaking.
But, I don’t have to wait. If PLTR goes up, I can easily sell these options at a profit and move on. Nobody says I have to hold for 2+ years.
Note that these are calls, so I desire higher prices. The higher the price, the more I make from my speculation. Furthermore, as you probably know, when I bought these options, I was already “in the money” given the $10 strike price.
I don’t have room here to turn this into some kind of master class on options trading. That’s not my intention. Instead, I’m providing investors with a way to ride the momentum with leverage, if that suits. It’s a different way to think about investing in PLTR.
How It Worked Out Over One Day
PLTR was up over 12% today. At the same time, my PLTR call options were up approximately 19% ($11.90; average between $11.70 Bid and $12.20 Ask).
Before I move on, there’s one important thing I want to add. Most investors tend to think of options for short term trading. However, investors should be aware that Long-Term Equity Anticipation Securities “LEAPS” are options contracts with expiration dates longer than one year. I think long-term oriented investors can potentially exploit PLTR options.
I trust that investors see how these LEAPS further reinforce a long-term orientation on PLTR. It’s possible to get very creative with PLTR in almost any scenario, no matter which direction things move, or how fast they move.
Options are generally much more speculative than direct ownership in the underlying stock. For example, there’s no doubt that some people got “rich” today playing with dramatically shorter timeframes with PLTR options:
Source: Yahoo Finance
These are call options that expire on November 20th, 2020. In other words, in just a few days. You can see how options can create winners out of thin air.
But, here’s a vision of caution for investors. Namely, there’s always a flip side. Here’s how put options for November 20th, 2020 looked today:
Source: Yahoo Finance
The Key Takeaways
My intention here is to give investors another way to think about investing in PLTR, given the current price action, future growth and general momentum. Also, the upward rise in PLTR price can be hedged with options using puts.
Investors get leverage with options. Plus, there are plenty of ways to use options to move into or out of a PLTR position. This can work in the short, medium or long term. It depends on the individual.
My preference right now is long-dated, in-the-money PLTR Call LEAPS. But, investors come in all shapes and sizes, with different goals and objectives. Therefore, it’s impossible to make any kind of absolute recommendation. Instead, what matters is optionality.
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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.