Deeper Analysis on PLTR and SQ

Weekend Homework

In this post, I dig deeper into 3 favorite retail names and see if they make sense for me to buy here. Remember this is not advice to buy or sell or do anything else really, but I am preparing my self for next week of trading and I am pleased to share my personal journal and prep notes with my followers.

Starting with Palantir PLTR.

First things first , a technical chart..

Chart A: PLTR Daily Auction. The stock has gapped down from $14 into $11 on an earnings induced shock. In traditional TA sense, this is negative for the asset. Note how high that volume on this down move is.

Chart A PLTR

Fundamental factors:

1. This company barely has any profits. Forward p/e is 40.

2. Revenue growth is quite strong , almost 50% YOY , and a lot of that has come from commercial account growth. Government side of the business is slowing down a little.

3. Talking about the revenue, this company has a price to sales of 14. I think given everything else, this is a very high multiple . For instance, COINBASE, which actually has a large commercial platform in a rapidly increasing industry has a P/S of just 7. My view is PLTR P/S 14 is not justified.

4. There is a question of insider selling. Pretty much the entire C suite is very active insider seller. It is one of the highest float stocks in world with 2 billion shares issued.

5. Institutionally there is not much support for the stock, there has been some institutional buying but not a whole lot. Cathie’s ARKK seems to be a very large holder of this stock and she is been dumping it too.

6. I like that that they do not have any debt. This along with the fact that they have billions in cash is a plus for me.

7. The stock is very volatile. This may be due to lack of institutional support. This is a negative for me.

My take on PLTR:

1. While I was bearish on PLTR at 27 dollars last year and got bullish recently at 11 dollars, doing a deeper dive into its technical and fundamentals, I believe the stock is a little expensive.

2. I would imagine 12-13 dollar may offer a resistance to the stock, I think the company becomes attractive to me around 8-9 dollars. It last traded at 11. Now know that I do think the downside on this may be 20-30%. If they can continue growing their revenue and earnings at this rate, they will eventually improve their multiples as the stock could be higher in 5 years than where it is now. I believe in their management 100 %.

3. I just think if I had to chose between something like a Coinbase and Palantir in this very moment of time, I will chose COIN which is quite a bit higher right now at 189 but I feel the downside that they have is lesser than the potential downside in PLTR (10-15 % compared to 20-30% in latter).

Hope this was helpful. Join my email list below to know when I post an update on Palantir, hopefully as early as March.

Square SQ next ..

Square chart below.

Chart B: SQ Daily Auction.

Chart B: Weak Technicals in SQ

As I see it, SQ has 2 main problems. It does not have the same issue as PLTR whose main issue really a lack of large sized commercial contracts. Most of SQ problems are unavoidable me thinks.

1. I do not like that SQ CEO has tied its fortunes very closely to that of Bitcoin. I 100% believe in Crypto and Blockchain. But my faith in Bitcoin is shaky at best.

2. Technically what SQ does can come under threat from the very mobile devices it sits on. Like the iPhone. Then there is also the question of Payment space itself. Who is safe in Payment space any more? PYPL is getting killed. BTW I got in at 130 and it is now looking at sub 100. Prior to that I was bearish on PYPL at 230 dollars :( …

3. Some other negatives about SQ are again that the ARKK family of funds owns this stock. Cash App shoe may also drop next week, so that becomes interesting to watch as well how many users they are losing to the competition.

My take on SQ:

1. I think the stock has sold off a lot. Now trading 97 bucks.

2. But that does not mean it can not go lower.

3. If I had to pick one payment stock and only one payment stock, I will rather pick PYPL. Which is now trading 103. Though I already like V much more.

4. I will re-assess SQ after its earnings. You know what if it drops to 50-55 bucks I will reconsider my analysis. I always wanted to buy SQ at 18 and I missed it, so I will rectify some of those mistakes if this trades down into 50-55. Remind me :)

Join my substack for FREE and get my updated analysis on SQ next week.

~ Tic

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