To The Moon

2024 has been nothing short of transformative for $Palantir Technologies Inc.(PLTR)$. With its share price climbing over 300%, Palantir has outperformed nearly every other tech stock. Now, the company is making waves again, forming an alliance with Anduril, SpaceX, and OpenAI to bid for U.S. government defense contracts. This bold move positions the coalition as a direct competitor to legacy defense giants like Lockheed Martin and Raytheon.

The question every investor is asking: Is Palantir still a buy? And could it realistically hit $100 next?

Why This Alliance is a Game-Changer

1. Disrupting Traditional Defense

Palantir's partnership with these tech innovators signals a seismic shift in the defense sector. Combining Palantir’s AI and data expertise, Anduril’s cutting-edge autonomous systems, and SpaceX’s dominance in space technology creates a formidable coalition. By incorporating OpenAI’s generative AI capabilities, the alliance brings a future-forward approach to defense contracting, a realm dominated by slower-moving incumbents.

2. Leveraging AI in National Security

Palantir’s strengths in AI analytics and big data make it indispensable for modern warfare and defense strategies. Its platforms—Foundry and Apollo—enable real-time decision-making and mission-critical operations. If the alliance successfully secures major government contracts, Palantir’s revenue growth could accelerate beyond expectations.

3. A Massive Total Addressable Market (TAM)

The U.S. Department of Defense budget exceeds $800 billion annually, with billions allocated to AI, space, and autonomous technologies. Even capturing a fraction of this market could justify Palantir’s lofty valuation and support its potential climb to $100.

The Valuation Dilemma: Is it Too Expensive?

Palantir’s rally has brought its valuation to eye-popping levels. At its current price near $70, the company trades at over 25x forward sales—a premium even among AI leaders like NVIDIA. While its profitability is a positive differentiator, growth expectations are sky-high.

Bullish View

• Catalyst-Driven Growth: Government contracts and AI adoption provide long-term revenue upside.

• Alliance Upside: Successful bids could lead to partnerships with NATO allies and other global defense agencies.

• Tech Valuation Premium: AI leaders tend to sustain high multiples in growth phases.

Bearish View

• Execution Risks: Competing with entrenched defense giants will be challenging, even with a strong alliance.

• Profit-Taking Risk: After such a significant rally, near-term corrections are possible, especially if contract wins take time to materialize.

How I’m Positioning

1. Holding for Long-Term Upside

I remain bullish on Palantir’s role in the AI-driven transformation of defense and enterprise sectors. However, with the current price near $70, I am not adding to my position. For long-term investors, buying on pullbacks to $60 or below would provide a better margin of safety.

2. Short-Term Options Play

For those looking to capitalize on momentum:

• Strategy: Buy $75 call options expiring January 2025, targeting a move toward $85-$90 if the rally continues.

• Risk Management: Exit if the stock breaks below $65, signalling a potential retracement.

3. Hedge Against Volatility

Given the sharp rally, a pullback is a realistic possibility:

• Strategy: Enter a bear put spread ($70/$65) to hedge against short-term downside risk.

Can Palantir Hit $100?

The path to $100 hinges on the success of the alliance and its ability to secure transformative government contracts. My outlook:

• Bull Case: $100+ within 12-18 months, driven by major contract wins and sustained AI demand.

• Base Case: $85-$90 by mid-2025, reflecting continued growth but slower-than-expected contract execution.

• Bear Case: $60-$65 if the market re-prices growth expectations or broader tech sell-offs occur.

Conclusion

Palantir’s alliance with Anduril, SpaceX, and OpenAI is a bold and potentially game-changing move in the defense sector. While the stock’s valuation warrants caution, its long-term potential remains undeniable. Whether Palantir reaches $100 or not, its strategic positioning in AI and defense makes it a stock worth holding for the future. For now, I’m cautiously optimistic, blending conviction with tactical hedging to navigate the volatility ahead.

Please DYODD.