Palantir Technologies Stock Surge: Momentum Shift Ahead?

Key Points

• Shares of Palantir have more than doubled in price this year off the lows, reaching new 52-week highs.
• The rise in share prices can be attributed to the optimism surrounding the AI sector and the company's introduction of its Artificial Intelligence Platform. 
• Analysts have a weak outlook on Palantir, with a consensus rating of Hold and a price target predicting over 40% downside. 

Shares of Palantir Technologies NYSE: PLTR has been on an impressive run this year. The short to medium-term share performance of the company is genuinely staggering. Since bottoming out in early May, the stock has held a steady uptrend and more than doubled in price from the lows set earlier in the year.

YTD shares of Palantir Technologies are up 139%, significantly outperforming the broader market. Over the previous month, shares have soared 62% higher. However, the stock soared to new 52-week highs on abnormal volume in the last week before failing to hold above the breakout level and closing near the day's low. Could the recent price action signal a shift in momentum and a short-term top for shares of Palantir?

Palantir is a SaaS company that focuses on AI and big data analytics. The company aims to augment human intelligence with data-gathering and analytic tools to improve the world. The company was initially intended as a tool for the federal government. However, it has since expanded to serve state and local governments and private corporations.

What Led to The Rise in Share Price?

Arguably the most significant driver behind the stock's impressive performance is the euphoria and optimism surrounding the AI sector. Palantir's share price has benefited enormously from the recent hype surrounding AI.

During the company's first-quarter earnings, Palantir announced its latest offering, the "Artificial Intelligence Platform." This new offering aims to combine the machine learning technologies of current company technologies with large language models, together existing in Palantir platforms. The latest offering could help companies and governments make improved data-driven decisions and optimize their processes.

In the first quarter of the year, company revenue rose 18%. Government revenue rose in line with estimates, and commercial revenue topped estimates, climbing by 15%.

Analysts' View Of Palantir

Analysts have a lackluster outlook on Palantir, with a current consensus rating of Hold, based on fourteen analyst ratings. The consensus price target of $9.29 predicts over 40% downside in the name. Five analysts have the stock at Sell, seven at Hold, one Buy, and one at Strong Buy.

Technical Analysis of Palantir

Last week Wednesday, shares of Palantir broke above a critical level of resistance which previously held firm for two days, at $16. The stock broke above resistance and briefly traded above $17 before failing and closing near the day's low at $14.69. Volume surged that day, trading over 227 million shares, far above its average volume of 60 million. The sharp failure after breaking above resistance, and failure to hold over $16 while trading abnormal volume on the day, signals a short-term top and possible shift in momentum.

The uptrend support is currently $15 and acts as the final line in the sand. The run might continue if the stock can continue to base above this critical support area. However, after the failed breakout, the stock will likely break the uptrend's support and test previous support around $14.50 - $14. As such, now might be a good time to take profits if you have been holding shares of Palantir this year, with the stock already up around 139% YTD.