Palantir Technologies (PLTR) shares have been under pressure in recent weeks, trading around $122.26, more than 40% below their yearly high. The pullback has erased a portion of the gains from last year's massive rally, which at its peak had lifted the stock over 3,200% from its 2023 low. Investors have been rotating out of high-multiple software names, but the upcoming quarterly report could shift the narrative.
Q2 earnings preview: growth expected to accelerate
Palantir is scheduled to release its second-quarter financial results on Monday. According to consensus estimates from Yahoo Finance, revenue is expected to jump 80% year-over-year to $1.81 billion, which would place the company among the fastest-growing in the software sector. For the third quarter, analysts project revenue of $1.91 billion, up 70% from the prior year, and for the full year, the company is expected to generate over $7.72 billion, a 72% increase.
The growth is being driven by strong demand for Palantir's Foundry platform, which helps organizations integrate and act on their data, and its Artificial Intelligence Platform (AIP), which layers large language models and AI capabilities on top of Foundry. Government contracts remain a key pillar, with the Trump administration's proposed $1.5 trillion defense budget likely to funnel additional funds to the company. In the last reported quarter, government revenue rose 85% to $1.67 billion, while commercial revenue climbed 133% to $595 million.
Valuation: still rich, but improving
On a forward price-to-earnings basis, Palantir trades at roughly 83 times earnings, which appears expensive on the surface. However, that multiple is well below its five-year average of 127. A more relevant metric for software companies is the Rule-of-40, which combines revenue growth and profit margins. Palantir currently scores 145%, indicating that its growth and profitability are both strong, making the stock look more reasonably valued relative to its fundamentals.
The options market also suggests a potential rebound. For options expiring next week, call open interest stands at 71,463 contracts versus 40,276 puts, resulting in a put/call ratio of 0.56. Volume-based data shows an even more bullish ratio of 0.40. These figures indicate that traders are positioning for upside ahead of the earnings release.
Technical setup: falling wedge points to a breakout
From a technical perspective, Palantir's weekly chart shows the stock bottomed at $106, a level that coincides with the 50% Fibonacci retracement. It has since rebounded slightly above the 100-week exponential moving average. The price action has formed a falling wedge pattern, characterized by two descending and converging trendlines. These lines are nearing their confluence, which often precedes a bullish breakout.
Analysts remain optimistic. Rosenblatt Securities reiterated a price target of $225, while Citigroup has a target of $200. The consensus target among analysts is $190, implying significant upside from current levels. The combination of strong fundamentals, improving valuation metrics, and a constructive technical setup suggests that Monday's earnings could be a pivotal moment for Palantir stock.
As always, investors should consider the risks, including the possibility of a miss on guidance or a broader market selloff in high-growth tech. The stock's volatility is likely to remain elevated around the earnings announcement.
This article is for informational purposes only and does not constitute financial advice.
