Palantir by Hiroshi-Mori-Stock via Shutterstock
Palantir Technologies Inc. stock has dropped to a new six-month low, which could mean it's for patient investors to buy. One way to do this, if the stock keeps falling, is to sell out-of-the-money puts to set a lower buy-in price and get paid while waiting.
Palantir stock closed down at $128.06 on Friday, April 10. That's below the prior six-month low of $128.84 on Feb. 28. Earnings are due out on May 4, so Palantir could move higher ahead of its results.
Image Source: Barchart - Palantir stock over the last six months as of April 10, 2026
Moreover, Palantir stock is worth considerably more than its present price, based on its strong free cash flow (FCF) and FCF margins.
Higher Free Cash Flow Expected Over the Next 12 Months
I previously discussed this in my Feb. 18 article on Palantir after the company released its Q4 results on Feb. 2. I showed that Palantir expects its 2026 adjusted FCF margin to be 56.7% at the midpoint, well over its 51% 2025 margin, and even higher than its Q4 56.0% adj. FCF margin.
Moreover, analysts have hiked their revenue forecasts over management's guidance. The company projected $7.19 billion in revenue for 2026. But, Seeking Alpha shows that 28 analysts now project much higher revenue:
2026 revenue: $7.26 billion
2027 revenue: $10.39 billion
That implies a next-12-months (NTM) average of $8.825 billion. As a result, using a 56.7% adj. FCF margin:
$8.825 billion x 0.567 = $5.0 billion NTM adj. FCF
That is over twice the $2.27 billion in adj. FCF it made in 2025. It's also over $1 billion more than management midpoint forecast of $4.025 billion for 2026, as I showed in my previous article. This implies its valuation could be significantly higher.
Higher Price Targets for Palantir Stock
As an example, let's assume theoretically that Palantir is set to pay out 100% of its FCF to shareholders. Based on its present market value of $306.3 billion, according to Yahoo! Finance, its 2025 FCF yield is:
$2.27 billion / $306.278 billion = 0.0074 = 0.74% FCF Yield
As a result, using our $5 billion FCF forecast for the next 12 months, Palantir stock could be worth much more:
$5.0 billion / 0.0074 = $675.7 billion market value
That's over 120% higher than today's market cap. However, just to be conservative, let's assume the market lowers its valuation metric to just 1.0%:
$5 billion / 1.0% = $500 billion
That implies that Palantir is still worth almost $200 more, or +65% above its present market cap of $303 billion. Thus, Palantir stock's price target (PT) is 65% higher, over $211 per share:
$128.06 x 1.65 = $211.30 PT
By the way, analysts agree that Palantir is worth much more. Yahoo! Finance says 29 analysts have an average price target of $185.25, and Barchart's mean survey price target is $198.30. AnaChart's mean price for 19 analysts who've written recently on Palantir is $182.75.
However, there is no guarantee the stock will rise to these price targets. One way to set a lower buy-in and get paid is to sell short out-of-the-money puts.
Shorting OTM Palantir Puts
For example, out-of-the-money (OTM) put options expiring on May 15 potentially have huge yields. The $115 strike price, over 10% below Friday's close of $128.06, has a midpoint premium of $5.05.
That means an investor who enters an order to “Sell to Open” can make an immediate yield of 4.39% over the next month, after posting collateral of $11,500 (i.e., 100 shares per put x $115):
$505 / $11,500 = 0.0439 = 4.39% one-month yield
Image Source: Barchart - Palantir puts expiring May 15 as of April 10, 2026
Moreover, more risk-averse investors can short the $110.00 strike price put, 14% lower than Friday's close, for a lower, but still attractive $3.68 premium:
$368/ $11,000 = 0.03345 = 3.345% one-month yield
Both of these contracts have low delta ratios -- 26.7% and 20.8%, respectively, implying a low chance that Palantir will fall to these strike prices. But even if it does, the investor's account will have low breakeven points (i.e., $115 - $5.05, or $109.95, and $110 - $3.68, or $106.32).
The bottom line is that Palantir stock is at new lows, looks deeply undervalued based on its strong FCF, and shorting OTM puts could be an attractive way to play it.
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