Palantir stock price remained under pressure this week as traders waited for the second-quarter earnings. PLTR was trading at $122.26, down by over 40% from its highest point this year, erasing some of the gains it made last year. This retreat will be put to the test as it publishes its financial results.
Palantir Technologies to publish its earnings on Monday
PLTR stock has plunged in the past few months as investors sold software companies and continued booking profits, following its strong bull run last year. At its peak last year, it was up by over 3,200% from its lowest level in 2023.
The stock will be in the spotlight as the management publishes its financial results for the second quarter. Analysts expect these numbers to show that its revenue growth accelerated in this period as companies and governments continued to spend.
Yahoo Finance data shows that the average estimate is that its revenue jumped by 80% YoY to $1.81 billion. This growth will make it one of the fastest-growing companies in the software industry.
For the third quarter, analysts expect the revenue will grow by 70% YoY in the third quarter to $1.91 billion. As a result, for the year, the company is expected to make over $7.72 billion, up by 72% YoY.
Palantir’s business has benefited from the ongoing demand from companies that are interested in its Foundry product, which is an operating system for data that lets firms integrate, model, and act on their data across the organization. Demand for the Artificial Intelligence Platform (AIP), which layers large language models (LLMs) and AI on top of Foundry.
Most importantly, its government business is continuing its growth as the US and its allies boost their spending. The Trump administration has requested over $1.5 trillion defense budget, with some of these funds flowing to Palantir. In its last results, the company said that its government revenue jumped by 85% to $1.67 billion. Its commercial revenue rose by 133% to $595 million.
Palantir has become undervalued
On paper, Palantir seems like a highly overvalued company as its forward price-to-earnings ratio has moved to 83. However, the multiple is much lower than the five-year average of 127.
Most notably, as a software company, one way of assessing its valuation is the Rule-of-40, which looks at its revenue growth and margins. It has a Rule-of-40 multiple of 145%, making it a bargain. This multiple suggests that its revenue and margins are continuing.
In addition to the valuation, the options market points to a rebound. Options expiring next week shows that its call open interest stands at 71,463 against puts of 40,276, giving it a put/call open interest ratio of 0.56. Based on the volume, the company has a multiple of 0.40.
Palantir stock price technical analysis
The weekly chart shows that the PLTR stock bottomed at $106, a notable level that coincides with the 50% Fibonacci Retracement level. It has now rebounded slightly above the 100-week Exponential Moving Average (EMA).
The stock has formed a falling wedge pattern, which is made up of two descending and converging trendlines. These two lines are nearing their confluence, which may lead to a rebound.
This likely explains why analysts have maintained their bullish outlook. Rosenblatt Securities reiterated the target to $225, while Citigroup has a target of $200. The consensus target among analysts is $190, higher than where it is today.