Palantir (NASDAQ:PLTR) is proving the naysayers wrong once again and has bounced back massively off recent lows due to the market getting more optimistic as tariffs are paused. The company also landed a new contract, and investors seem to be piling in once more.
This is while the rest of the tech giants have stumbled and are still in the red for the month, whereas PLTR stock has bucked the trend and is up 25.2% as of writing.
Palantir's recent surge has been due to many key catalysts lining up and boosting its position in both government and commercial markets. There was a headline-making collaboration with Northrop Grumman (NYSE:NOC) on the U.S. Army's Tactical Intelligence Targeting Access Node (TITAN) and another announcement from NATO about the acquisition of Palantir's AI-based military system. This was described as one of the swiftest procurements in NATO's history.
And obviously, President Trump's announcement of a 90-day pause on reciprocal tariffs for all countries except China sent the broader market on a double-digit recovery rally. It caused an 18.2% single-day gain for Palantir stock on April 9.
Palantir's upcoming Q1 earnings report on May 5 could serve as another catalyst for the stock, as analyst expectations are quite conservative if you compare them to previous earnings reports. Analysts expect EPS to grow 62% to $0.13 and revenue to grow 36% to $864 million.
That said, some analysts project EPS as low as $0.07. Palantir has a history of beating earnings estimates, so the market is likely underestimating the fundamentals. The company’s own guidance sees Q1 sales between $858 million and $862 million. The midpoint of Palantir’s guidance is only $4 million off expectations. In Q4 2024, it beat revenue estimates by 6.65% and 3.17% before that, so it’s very likely that Palantir will beat estimates once more.
If Palantir maintains this momentum and surpasses the relatively modest expectations for Q1, the stock could easily surge to new highs.
The strength here is definitely impressive. PLTR stock is recovering much faster than the broader market. However, the lofty valuation is something you should consider before buying in. The company trades at a substantial premium to most software companies on conventional metrics like price-to-sales ratio, and there’s little room for disappointment.
In February 2025, Palantir reached a peak price-to-sales ratio of 106 times. A review of over 50 software stocks from the last decade found only six others that achieved P/S multiples over 100, and all six eventually fell at least 73%, with an average peak-to-trough decline of 80%. If Palantir follows a similar trajectory, it could eventually drop to around $25 per share from its February high near $125.
There’s plenty of uncertainty here, and I wouldn't recommend having heavy exposure to PLTR stock in such a risky environment. However, you could gain from short-term exposure to it before earnings.
