2024-04-29 10:50:34 ET
Palantir (NYSE: PLTR) stock price has come under pressure in the past few months as concerns about its valuation remains. It has also retreated amid fatigue in the artificial intelligence (AI) industry. The stock dropped to a low of $20.30 on Monday, down from the year-to-date high of $27.52.
Palantir Technologies earnings ahead
Palantir Technologies, the $50 billion company, has been one of the fastest-growing firms in the US. Its annual revenues have jumped from $729 million in 2018 to over $2.25 billion in 2023.
Analysts expect the company will continue growing, with its annual revenue set to get to $2.7 billion and $3.23 billion in the next two financial years. It has also turned a corner and become a profitable company.
Palantir is benefiting from three main themes. First, countries from around the world are now boosting their defense spending as geopolitical risks rise. In the US, defense spending is expected to get to over $1 trillion in the next few years.
These developments are important because Palantir generates substantial sums of money in the defense industry. Also, global risks are expected to continue rising in the coming years, boosting its revenues.
Second, the company is benefiting from the rising demand of its artificial intelligence tools among companies and governments. Finally, more companies are embracing its technology to boost their market share.
The most recent results showed that the company’s commercial revenue rose by 32% YoY in Q4 to $284 million. Government revenue rose by 11% to $324 million. In future, analysts expect that the commercial business will be bigger than the defense sector.
Looking ahead, the next important catalyst for the Palantir share price will be its financial results that are scheduled for Monday next week. These numbers will provide more colour about its performance in Q1.
The average estimate is that the company’s revenue rose by 19% to $625 million while its earnings per share rose to $0.08.
Still, the key concern for Palantir is that it is severely overvalued since this is a $50 billion company and its revenue in 2025 is estimated to come in at $3 billion in 2025. That brings its forward price-to-sales of 16.6, which is substantial.
Palantir stock price forecast
The daily chart shows that the PLTR share price has done well in the past few months. Recently, however, it has pulled back from the YTD high of $27.5 to the current $22.85. It has also moved slightly above the 50-day and 25-day Exponential Moving Averages.
The stock has also rebounded above the key resistance at $21.80, its highest swing in November last year. At the same time, the Relative Strength Index (RSI) has moved above the neutral point at 50.
Therefore, at this stage, the outlook for the PLTR stock price is neutral ahead of earnings on May 5th. The key support and support levels to watch will be at $20 and $25. A break below $20 will point to more downside while a move above $25 will open the possibility of it rising to the YTD high of $27.52.
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