Palantir Technologies (NYSE:PLTR) stock one of many names swept up by “AI mania” earlier this year.
During this time, PLTR stock zoomed from around $6.50 per share, all the way back up to above $20 per share.
Shares in the data analytics software firm have since coughed back a chunk of their 2023 gains, with shares retreating to prices in the mid-teens.
At first glance, it may seem as if PLTR is at risk of staying stuck at current price levels, or worse, vulnerable to another wave of declines. After all, the market is still on the fence whether AI will lead to the sort of high growth this company has previously failed to deliver.
However, upon closer inspection, it’s very possible that things could soon again turn a corner. Here’s why.
PLTR Stock and Cooling Expectations
The most popular AI stocks took off in early 2023, but it wasn’t until mid-year that Palantir benefited from this trend. As recently as May, shares were still changing hands at single-digit price levels.
Even the initial swing of PLTR stock back into high-flier mode was as much driven by overall improvement with the company’s results and guidance, as opposed to merely just AI hype.
You can chalk that up largely to the “mania” for AI stocks taking place. After the big run-up among the “Magnificent Seven” tech stocks, investors wanted to get in early on smaller names, like Palantir.
However, since the stock’s fast trip from $6.50 to $20 per share, it has experienced a moderate reversal, due to two factors.
First, the overall “AI stocks” trend cooled down in popularity starting in late July, cooling down secondary plays along with it.
Second, analysts like Morgan Stanley’s Keith Weiss questioned how quickly the company could monetize AI technology, and the market followed suit.
Proving Wrong the Skeptics? It’s Possible
Investors who bought into PLTR stock near $20 per share may feel frustrated. Those who got in before the summer rally may wonder if it’s time to bail. Skeptics are undoubtedly elated.
Assuming these skeptics have shorted the stock, they may be excited about the prospect of further price declines. This could happen in theory. If AI cannot drive a growth resurgence in the coming quarters, shares will probably sink again.
However, while the skeptical of this trade may be in the lead today, the doubters could still be ultimately proven wrong.
Why? A more recent development may suggest that the market has prematurely discounted Palantir’s ability to capitalize on this technology. Last week, the company held a conference to show the high customer satisfaction so far with Palantir AIP (Palantir’s artificial intelligence platform).
As Wedbush’s Dan Ives argued, this high customer satisfaction, plus the fact the platform has attracted a variety of end-users from numerous industries, suggests that Palantir AIP will have a positive impact on results this quarter and the next, not to mention in 2024.
The Verdict
While PLTR has been trending lower lately, I wouldn’t rule it yet another sentiment shift. The prospect of AI finally helping to get the company back into the growth fast lane would help drive such a pivot.
Still, keep in mind that other factors, such as the Federal Reserve’s “hawkish pause” with interest rates could outweigh the positive takeaways from the Palantir AIP event. This latest macro development could lead to further weakness for shares in the immediate-term.
Then again, if shares keep falling, seizing the opportunity could prove profitable. Palantir’s Q3 earnings release, its next big “moment of truth” for shares, is on Nov. 7.
If earnings and guidance vindicate Ives’ latest arguments, and disprove the skeptics, bullishness for PLTR stock could return in a big way.
PLTR stock earns a B rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.