Should you buy Palantir dip as oversold conditions push stock higher?
- Palantir stock closed up more than 13% on Friday.
- The stock has lost more than half of its value year to date.
- Palantir is currently oversold but trades below a key resistance zone.
Palantir Technologies Inc. (NYSE:PLTR) had a turbulent year, having lost 54.99% year-to-date. Most of the losses have been incurred in the last 30 days, with at least a 31% negative return in the month.
A mixed earnings report last week was to blame. The company posted a profit of 2 cents per share in Q1 2022. The earnings widely missed expectations of 4 cents a share. The revenue still surpassed estimates at $446 million, while it guided a further rise to $470 million.
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Nonetheless, Palantir ranks as a mission-critical name. Increased geopolitical tensions will heighten the need for national intelligence and cyber security. Palantir will benefit as a result.
Still, we think that a further diversification into commercial sales will be key. This relates to the fact that lower growth government revenue remains the key driver of Palantir growth.
On Wall Street, out of 10 analysts, Palantir is rated a buy by two, hold by five, and sell by three. It signifies a mixed rating as the stock attempts to escape the yearly dip. But which way to go?
Palantir escapes dip but resistance at $10 could hold it back
Technically, Palantir trades at the lowest price since IPO. At a price of $8.34, the stock is on an upside from an extremely oversold bottom of below $7. The current RSI reading of 25 shows the stock is still in the oversold region.
The recent gains imply that the investors are buying the dip. Nonetheless, we believe the stock will hit a resistance at $10. Investors should wait for a break above it before considering that a lasting bullish momentum has started.
Palantir has a mixed rating on Wall Street. The stock weakness was heightened by a mixed earnings report. Investors should buy after a break above $10.
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