Our Analysis of Palantir Technologies Inc. (NASDAQ: PLTR)

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At the start of 2025, we took a look back at the performance of our weekly “Quantamental” analysis of some of the most widely owned and popular stocks in the stock market.

As a reminder, our “Quantamental” approach combines technical analysis (“quantitative”) and operating company analysis (“fundamental”) to quickly analyze a stock.

We use it as an initial screen to see if a stock merits more work, but it is also very useful as a standalone analysis tool. We saw this in the results of our review of our 2024 analyses, where it demonstrated strong performance.

The only "misses" the approach posted (out of sixteen companies analyzed) were on two high-flying technology stocks – Tesla Inc. (NASDAQ: TSLA) and Palantir Technologies Inc. (NASDAQ: PLTR).

Several weeks ago, we reviewed TSLA, and today, we will review PLTR.

Here is the analysis…

Palantir Technologies Inc. (NASDAQ: PLTR) – AVOID

We analyzed PLTR on October 8, and it was our most significant "miss" as the stock almost doubled (+93%) after our analysis and view that investors should AVOID the stock.

Where were we wrong with our analysis?

PLTR is tricky for our framework.

We look at technical and fundamental factors but seldom consider valuation.

At the time we wrote up PLTR, the stock had already had a strong run and was overbought based on the relative strength index or “RSI.” Here is the stock price chart over the last few years, along with the RSI…

We have circled in red where we made our AVOID recommendation.

We use RSI as a tactical entry point signal. We usually avoid stocks that are very overbought with an RSI of over 70. We are more attracted to very oversold stocks with an RSI of less than 30.

The difference between those two signals is that oversold signals are much more powerful (and useful) than overbought signals.

An overbought RSI of 70 or greater is often an indicator the stock will go HIGHER in the intermediate term. The stock might consolidate in the next few days or weeks, but usually, in the next few months, it goes higher.

This is what happened with PLTR.

PLTR also ended up being a big beneficiary of the election of Donald Trump.

Why did it benefit so much?

Honestly, we are not sure. There is no direct link to why PLTR's services would be more utilized under the Trump administration versus the Biden administration. Perhaps the idea is that Trump will be more friendly to artificial intelligence (AI) powered solutions. That is a stretch in our view, but the best thesis.

Either way, it doesn't matter. It responded that way to the news and remember that in the stock market, PRICE = TRUTH.

We mentioned before that PLTR was tricky for our framework, and the difficulty was that the stock was very overbought (an unattractive tactical entry point). Still, the earnings momentum (as measured by earnings revisions) has been excellent.

Here is a chart showing the fiscal year 2025 analysts' earnings estimates and how they have been revised over the past few years…

Estimates initially came down for PLTR (and the stock struggled), but since late 2023 they have only gone up.

It took a while for the stock to respond, but eventually, it did and has moved much higher.

Earnings revisions are the most potent driver of stock prices in our experience. If they move higher, the stock's valuation seldom makes any difference.

With PLTR, however, we felt the combination of an exceptionally high valuation and an overbought tactical entry point made the stock unattractive. Obviously, we were wrong for the last few months.

What would we do with the stock now?

Here is a stock price chart including the moving averages…

The stock went from being overbought to being even MORE overbought! As we said, this can often happen.

This is why we don’t say to short overbought stocks and rather just say to avoid them.

Eventually, that extreme overbought position did catch up with the stock, and at the start of 2025, the stock sold off more than -20% in just a couple of weeks. Then it bounced right off of the 50-day moving average and is back near all-time highs.

While the RSI is not currently at an overbought level, we still think we would avoid the stock.

Looking at the velocity of the upward move and the fact that the stock is trading at more than double the 200-day moving average makes us cautious.

It isn’t that we don’t think PLTR is a great company or that operating momentum will falter.

We think that being this extended from those moving averages makes it vulnerable to steep pullbacks like the one we just saw a couple of weeks ago.

We would continue to remain patient and wait for a better entry point. Our opinion remains AVOID on PLTR stock.