Palantir stock: Wyckoff Theory points to a dive to $100 after earnings

Palantir stock price is stuck in a bear market after falling by over 32% from its highest point last year.

PLTR was trading at $140 on Friday as investors wait for the upcoming earnings report, which will provide more color on its growth momentum and help to justify its valuation. 

The Wyckoff Theory suggests that the stock has more downside as it moves to the markdown phase.

Palantir stock is falling amid growth and valuation concerns

There are a few reasons why the Palantir stock price has crashed in the past few months.

First, the decline mirrors the performance of other software companies that have plunged amid AI disruption fears.

Most software companies have been in the red this year, with ServiceNow, Intuit, and Adobe being some of the most affected. Analysts believe that advanced AI models will disrupt these companies.

While Palantir is an AI company, there are concerns that AI will disrupt its operations.

For example, in the future, it will be possible for companies to use products like Claude to conduct intense analysis such as the one offered by Palantir.

However, there are signs that these fears are being overstated and that most software companies will likely thrive in the new AI era.

There are also concerns that Palantir has become one of the most expensive companies in the United States, with data showing that it has a forward price-to-earnings ratio of 125.

In contrast, NVIDIA, a top AI enabler, has a multiple of 23. The median multiple in the technology sector is 32 

Palantir to publish its earnings on May 4

As such, for Palantir to maintain its valuation, it will need to publish a strong quarterly report on May 4 of this year.

Wall Street analysts predict that the company's revenue will come in at $1.54 billion, up by 74% from the first quarter of last year.

This revenue is being boosted by the rising demand of its services from American enterprise customers.

Its most recent results revealed that Palantir’s US commercial revenue jumped by 137% YoY, while the customer count rose by 50%.

Companies are joining Palantir to have an edge against their competitors.

The analysts also expect the upcoming report to show that its second-quarter revenue will come in at $1.68 billion, up by 67% YoY.

The annual revenue is expected to come in at $7.27 billion, up by 62% YoY.

Wall Street analysts are largely bullish on the Palantir stock price with the average estimate being $198, up by 40% from the current level.

Wedbush’s Dan Ives has become one of the most bullish on the stock and has placed a target of $230.

Palantir stock price technical analysis 

PLTR stock chart | Source: TradingView

One way to predict the Palantir stock price is the Wyckoff Theory, which identifies four stages that assets go through.

In this case, Palantir spent 2022 and 2023 inside a range of between $5.5 and $44.4. It formed a cup-and-handle pattern in this period.

The stock was in the accumulation phase of the Wyckoff Theory during this period.

It then moved to the markup phase when it established itself as a top player in the AI industry.

This positioning pushed it to a record high of $207.

There are signs that the stock has now moved to the distribution phase, which is followed by the markdown.

If this is correct, it means that it will resume the downward trend and possibly retest the support at $100 and then rebound.