TOP 3 stocks for May 2023

Palantir - the star of 2023?

The last month has been a dream come true for Palantir. This is due to the fact that the company's shares have appreciated by almost 100%. Since the beginning of the year, the company's capitalisation has increased by almost 140%. It's not too surprising that Palantir is one of the most popular stocks among Purple Trading clients. But what has caused such a frenzy? Palantir reported its second consecutive profitable quarter during May - yes, that’s it. But let’s not forget that 2023 should be the company's first ever profitable year. But the numbers themselves were not so miraculous. Earnings per share came in at 5 cents, beating expectations by 1 cent. Sales were up 18% year-over-year to $525 million, while the market was expecting $506 million. So why should you keep an eye on Palantir’s stocks?
 

To speculate or to invest and what about artificial intelligence?

Palantir has long been known for its high dependence on the US government, which is a major customer. However, investors were pleased with the growth in commercial customers, which increased by 52 to 155 compared to Q1 last year. Revenue from that section grew by 26%. The overall share of government customers in revenue has now fallen to 55%. The outlook for the next quarter and the rest of the year was also positive. Q2 sales should be around $530 million and for the full year around $2.19 and $2.24 billion. However, even such numbers do not quite justify such meteoric growth. For answers, we have to look at a single aspect - the artificial inteligence.
 

_{Shares of Palantir in the MT4 platform on the H1 timeframe along with the 50 and 100 day moving averages}

Palantir offers government and commercial entities data analytics software that uses artificial intelligence. Demand for it is reportedly huge. Palantir is thus a shining example of a stock that has ridden the AI wave in recent weeks. Positive results and the general euphoria surrounding technology stocks have thus propelled this stock to its highest level since early 2022. While Palantir is well positioned to benefit from the development of AI, particularly in the defense sector, high volatility may accompany this stock in the short term. Any negative news could send Palantir stock tens of percent lower. Thus, Palantir can still be described as a speculator's paradise rather than a suitable long-term investment.

Nikola - is delisting coming?

The exact opposite development of the shares has been recorded by Nikola, which is even in real danger of delisting from the stock exchange. The shares have plunged 75% this year and have already fallen well below the key $1 mark. Over the past year, they have written down almost 95%. The story of Nikola probably does not need to be told in detail. Nikola has promised to produce trucks powered by electricity and hydrogen, and has even delivered a few concept cars to customers. Nikola entered the stock market in 2020, and even with the frenzy around Tesla, it managed to surpass the iconic carmaker Ford very quickly with its capitalization. However, the higher the climb, the harder the fall. Gradually, it became clear that Nikola had lied about virtually every aspect of its business and its stock price gradually fell to almost zero. Does it make sense to think of this stock as a suitable speculation? Or is there a real risk of delisting from the stock market?

_{Nikola shares in the MT4 platform on the H1 timeframe together with the 50 and 100 day moving averages}

Results for the first quarter of the year were not encouraging, with Nikola reporting sales of just $11 million on 31 trucks. The market was expecting sales of around $12.5 million. However, it was much worse to see the loss, which came in at $169 million, up $16 million year-over-year. The carmaker's business is thus highly unprofitable and Nikola may realistically be facing bankruptcy, as the company ended the first quarter with $154 million in cash, and this money could run out in the current quarter.

In addition, higher interest rates make debt servicing more expensive. Nikola can thus raise additional funds by reselling its shares, which may push the capitalisation even lower. The company at least raised $35 million and the sale of a joint project with Iveco. Nikola will now focus exclusively on the North American market. However, the company is in real danger of delisting from the stock market as its share price has fallen below $1. Nikola has even sent out warnings to investors. It now has less than 180 days to get its stock back above $1. Thus, currently any speculation on Nikola stock can be very risky due to the threat of delisting and poorer liquidity.

Will Virgin Galactic shares shoot for the stars?

Virgin Galactic shares have long been among the most popular at Purple Trading. While they have only gained 8% since the start of the year, the journey has been fraught with volatility. Over the past year, the stock has then written down almost 50% of its value and is currently hovering very close to its yearly low. Unsurprisingly, Virgin Galactic has not made a commercial flight in two years. Now, however, there are signs of better times ahead. Towards the end of May, Virgin Galactic successfully completed testing and its shuttles should return to the frontier of space with commercial clients during June. The Eve and Unity shuttles are expected to ascend to the space frontier every month, but Virgin Galactic plans to introduce new models that could fly on a weekly basis by 2026.
 

_{Shares of Virgin Galactic on the MT4 platform on the H1 timeframe along with the 50 and 100 day moving averages}

However, the economic results for the first quarter were traditionally not worth much. Two years of development and improvement resulted in a large loss. It grew by more than $65 million year-on-year to $159 million. But unlike the aforementioned Nikola, Virgin Galactic is relatively well stocked with cash - at the end of the quarter it had nearly $900 million. In addition, sales of new space travel should boost revenues (one flight currently costs $450,000). However, we need to keep an eye on the overall macroeconomic situation - the current return of risk-on sentiment to the markets has not supported Virgin Galactic shares much.

A further rise in US interest rates may increase the likelihood of a recession and demand for such a luxury experience may be limited for a longer period of time. In addition, any commercial flight postponements may send the stock back to a one-year low. For fans of the company, the current situation may make it a good buy for the longer term, but it is still an extremely risky company. Thus, Virgin Galactic rather offers room for speculation.

Recommended articles: