Palantir Technologies, known for its cutting-edge AI solutions, has fallen victim to ongoing market pressures that have significantly impacted software stocks. The company’s stock recently dropped below its 200-day moving average for the first time since early August 2024, culminating in its lowest closing price since July. With expectations for its Q4 earnings announcement low, analysts are optimistic about a potential turnaround.
Dean Curnutt, the CEO of Macro Risk Advisors, has weighed in on the situation, predicting that the subdued expectations could lead to increased volatility in Palantir’s stock following the earnings report. He outlined a strategic options trade designed to capitalize on this anticipated recovery. Curnutt recommends purchasing call options with a strike price of $162.50, while simultaneously selling call options at a higher strike price of $182.50, both set to expire on Friday. This strategy could yield a potential payout ratio of approximately 10.5 to 1.
Historically, Palantir shares have demonstrated resilience after experiencing significant downturns prior to earnings reports. Curnutt highlighted that during their last eight quarters, the company’s stock showcased strong rebounds after similar negative trends, with recent instances showing post-earnings jumps of 22% and 45%.
This current moment presents a cautiously optimistic outlook for investors willing to navigate the volatility surrounding Palantir. With a historically strong rebound record following low expectations, there is hope that the upcoming earnings report could catalyze an upward shift for the tech company.