Can Market Sentiment Sustain PLTR's Price Surge Today?

During today's afternoon trading session, Palantir Technologies took the market by storm, rocketing to $27.23 per share despite it now being above its mean target price of $21.45. This 5.3% movement implies there may not be much more room for upwards movement for the stock -- if its analysts are to be believed. They are giving the Software stock on average rating of hold, with target prices ranging from 9.0 to 35.0 dollars per share.

The market sentiment on the stock is decidedly optimistic, since Palantir Technologies has a short interest of only 3.6%. This is the percentage of the share float that is being shorted. Each short position represents an investor's expectation that the price of the stock will decrease in the future.

Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.

A possible indicator of market sentiment on a stock (besides its share price, of course) is the portion of institutional investors that make up its shareholders. Institutions such as banks, hedge funds, and wealth managers deploy significant resources towards identifying good investments. If they are invested heavily in a given company's stock, it could mean it's a good investment. Or it could mean the company is being targeted by a takeover attempt.

For what it's worth, institutions own 41.9% of Palantir Technologies's shares, which is an average amount. It means that many institutions are invested, but not to the extent that they would be in a stock such as Apple or Amazon, whose institutional ownership rates hover around 60%. Bear in mind that institutional ownership is just one piece of the puzzle in determining market sentiment, and you should not consider this factor alone in making an investment decision.

Overall, there is mixed market sentiment on Palantir Technologies because its an analyst belief that shares are overpriced, a hold rating, an average amount of shares sold short, and only a small number of institutional investors. Warren Buffett famously said that in the short term, markets are voting mechanisms, but in the long term, they are weighing mechanisms. This means that long term investors should be aware of a stock's fundamentals before committing.

Buffett was one of the fist investors to focus on free cash flow as a yardstick for a company's health. Here are PLTR's recent cash flows:

Date Reported Cash Flow from Operations ($ k) Capital expenditures ($ k) Free Cash Flow ($ k) YoY Growth (%)
2023 712,183 15,114 697,069 279.44
2022 223,737 40,027 183,710 -42.81
2021 333,851 12,627 321,224 204.01
2020 -296,608 12,236 -308,844 -192.83
2019 334,833 2,149 332,684 739.58
2018 -39,012 13,004 -52,016
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.