Earlier this month, Palantir Technologies (NASDAQ:PLTR) tanked after earnings, falling to the low-$20s per share. Since then, Palantir stock has languished at this reduced price level.
While this pullback represents just a moderate price decline compared to pre-earnings prices, it s frustrating, no matter whether you are an investor underwater in your position, or even if you’ve held it for quite some time.
It doesn’t help, either, that analysts and investors continue to split hairs about PLTR’s supposedly rich forward valuation. Taking this valuation into account alongside macro factors, to many market participants, PLTR appears to have minimal downside, and questionable upside.
However, it’s not set in stone that shares are going to experience a big drop-off. It’s also not guaranteed that shares will continue to tread water. Much is in place for shares to go on another extended run, far sooner than you think.
Palantir Stock: Stuck in the Doldrums
Interest rates aren’t coming down anytime soon. Per the latest data, the U.S. economy is slowing down. With this in mind it’s easy to see why investor enthusiasm about AI stocks has continued to cool. With this macro backdrop, it may prove difficult for these companies to meet, much less beat, what remain very high expectations.
Like other stocks with big exposure to the generative AI growth trend, Palantir stock is more or less treading water. If being in the doldrums isn’t bad enough, if you listen to the bears, what lies ahead for PLTR makes current price action seem very tolerable.
Per the Palantir skeptics, shares are at risk of a substantial price correction, even if results meet rather than fall short of expectations. Admittedly, this bear case makes sense. Palantir may be growing at a double-digit clip, but at its current valuation of 65.6 times earnings, merely meeting expectations just won’t cut it.
Over the next few quarters, the company will need to either deliver revenue and earnings growth ahead of forecasts, or provide concrete guidance as to when growth will re-accelerate. Fortunately for PLTR bulls, this scenario could indeed play out.
Overlooked Takeaways Could Clue You in on a Big Opportunity
Check out the headlines regarding the aforementioned Palantir stock earnings release, and you’ll see plenty about how the company’s updates to guidance failed to impress. However, it’s very possible that Palantir’s outlook proves to be very conservative in hindsight. How so?
For one, certain key performance indicators unveiled in the earnings release indicate a far greater level of growth may be just around the corner.
Last quarter, forward-looking indicators like remaining deal value and the number of signed deals increased by a far greater extent than the 27% year-over-year increase in commercial sales. Palantir also reported a quarter-over-quarter acceleration in growth for its governmental business.
Alongside this, Palantir has also placed greater priority on profitability in recent quarters. This comes even as the company is spending heavily to build out its Artificial Intelligence Platform.
If Palantir’s management figures out how to best balance earnings maximization with revenue growth maximization, earnings in 2024 and 2025 could very well exceed current forecasts.
Right now, the market is overlooking these takeaways. Put simply, this works to your advantage. Months ahead of Palantir’s latest earnings release, you could accumulate a position, ahead of the event that may drive investors to change their tune.
The Verdict: Feel Free to Buy PLTR, Ahead of a Possible ‘Dog Days of Summer Rally’
Palantir is expected to next release quarterly results in early August. While not certain, the above-mentioned take-away could be the prelude to some major positive surprises for investors, when it comes to Q2 results, as well as guidance for the rest of 2024.
In turn, this could drive the next rally for PLTR, even during the dog days of summer. At that point, the market could realize it has erroneously dismissed this stock as being overvalued and overhyped.
A higher level of growth, and further improvements to profitability, will demonstrate that this stock is well worth paying a multiple for today, for the high likelihood of strong growth tomorrow.
Taking this into account, ignore the bears, be patient, and feel free to buy Palantir stock while market skepticism keeps it steady in the low-$20s per share.
Palantir stock earns an A rating in Portfolio Grader.
On the date of publication, Louis Navellier had a long position in PLTR. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
