- Palantir stock price has crashed into a bear market after falling by 30% from its all-time high.
- The sell-off mirrors the performance of other software companies.
- The stock may continue falling as it remains in the markdown phase of the Wyckoff Theory.
Palantir stock price remains in a bear market after crashing by 30% from its highest point in October last year, a move that has erased billions of dollars in value. This retreat has coincided with the ongoing sell-off in software stocks. So, will the highly overvalued PLTR stock rebound?
Top Reasons Why Palantir Stock Price Has Crashed
The PLTR stock price has dropped into a bear market this year for several important reasons. First, the sell-off has coincided with the plunge among other software companies, which have dropped amid concerns of disruption by artificial intelligence (AI) tools.
Some of the other top laggards are companies like Atlassian, AppLovin, Adobe, ServiceNow, Intuit, and Microsoft.
The stock has plunged because of the rising valuation concerns, which have existed for years. For example, Seeking Alpha data shows that the company has a forward PE ratio of 112, much higher than the sector median of 21.
In contrast, a fast-growing company like NVIDIA has a multiple of 20. The S&P 500 Index has a forward PE ratio of 19, while top companies like Broadcom and Micron have multiples of 30 and 8, respectively.
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To be clear: Palantir deserves a premium valuation because it is one of the fastest growing companies in the United States. Analysts expect that its annual revenue will be $7.2 billion, up by 62% YoY, followed by $10.4 billion next year. Its earnings-per-share is expected to grow from last year’s 75 cents to $1.32, followed by $1.86 next year. Still, a 112x multiple seems too high.
Palantir stock is also retreating as investors book profits after it soared by over 3,000% from its lowest level in 2023 to the highest point last year. Technically, this could be a sign that the stock has moved to the distribution or markdown phases of the Wyckoff Theory.
The most recent financial results showed that Palantir’s business continued doing well in the fourth quarter as its revenue jumped by 70% in Q4 to $1.4 billion, with its quarterly profit hitting $609 million. This growth is being driven by the commercial segment, with the US business expected to bring in $3.4 billion this year.
Wall Street analysts are still highly bullish on the Palantir stock price ahead of its earnings on May 4. The average estimate among analysts is that its stock will jump to $197, up nearly 40% from the current level. Some of the most bullish analysts point to its rule-of-40 multiple, which stands at 127%.
PLTR Stock Price Technical Analysis
The weekly chart shows that the PLTR stock price has slumped from the all-time high of $207 in October to $147 today. It has already moved below the 23.6% Fibonacci Retracement level at $160 and formed a head-and-shoulders pattern.
The stock seems to have formed an island reversal pattern, which normally happens after a gap-up. Therefore, the most likely Palantir share price forecast is bearish, with the next key target being the psychological level at $100, which is slightly above the 50% Fibonacci Retracement level.
In the future, however, the stock will likely bounce back and retest the all-time high of $207.
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