Palantir's Hot Momentum Returns: Is This the Perfect Buy Point?

In May 2025, Palantir Technologies (PLTR) found itself at a crossroads. The company’s stock had surged 58% year-to-date, making it the S&P 500’s top performer, only to plummet 12% in a single day after its Q1 2025 earnings report. While investors grappled with its astronomical valuation multiples, the stock’s volatility created a critical question: Is this the ideal moment to buy?

The Momentum Surge and Valuation Dilemma

Palantir’s first-quarter results were undeniably strong. Revenue hit $884 million, a 39% year-over-year jump, fueled by a 71% surge in U.S. commercial revenue and a 45% rise in government contracts. The company also raised its full-year revenue guidance to $3.89–3.90 billion, a 36% increase over 2024. Yet, the stock fell sharply due to concerns about its valuation. At the time, Palantir traded at 520x trailing earnings, 196.9x forward earnings, and 92x revenue—metrics that dwarfed peers like Salesforce (25.1x forward P/E) and Microsoft (30.3x forward P/E).

Technical Analysis: Support Levels and Resistance

The stock’s extreme volatility offers clues for traders. The May 6, 2025, sell-off saw PLTR dip to a low of $105.32 before rebounding slightly. Technical analysts point to $105–$110 as critical support levels, where buying interest emerged post-selloff. Resistance, however, looms near $120–$125, areas of prior highs that could test the stock’s momentum.

The May 6 drop also saw trading volume spike to 201 million shares—nearly double the 30-day average—indicating a significant shift in sentiment. Meanwhile, the stock’s $281 billion market cap, which briefly eclipsed Salesforce, highlighted its status as a valuation outlier.

Analysts Split: Buy the Dip or Avoid the Bubble?

Analysts remain divided. Bullish voices, such as Wedbush’s Dan Ives, argue that Palantir’s AI-driven growth engine (e.g., its $178 million U.S. Army contract) justifies long-term optimism. Ives emphasized the company’s “generational platform” and predicted that sustained revenue acceleration could reduce its P/S multiple to ~17x by 2029, aligning with more reasonable valuations.

Bearish analysts, like Jefferies’ Brent Thill, labeled the stock’s valuation “irrational,” warning that even robust growth would struggle to justify a 92x revenue multiple. The consensus rating of “Hold” and a price target of $98.25 (implying an 11% downside) underscored skepticism about near-term prospects.

Key Risks and Catalysts

• Valuation Risk: Palantir’s multiples require flawless execution. A miss on its $3.9 billion 2025 revenue target or slower growth in international markets (which saw commercial sales drop 5% in Q1) could amplify downside pressure.
• Technical Catalysts: A close above $125 would signal renewed momentum, while a breach below $105 might trigger further panic selling.
• AI Adoption: The expansion of its Artificial Intelligence Platform (AIP) into healthcare (e.g., Tampa General Hospital) and insurance (e.g., AIG) could validate its growth narrative.

Conclusion: A High-Risk, High-Reward Inflection Point

Palantir’s stock nears a pivotal buy point, but investors must weigh risks and rewards carefully. On one hand, its 40% annual revenue growth, government contract wins, and AI-driven pipeline (with U.S. commercial remaining deal value up 127% to $2.32 billion) suggest a company poised for dominance in enterprise AI.

On the other hand, its 92x revenue multiple—far exceeding peers—leaves little room for error. The $98.25 consensus price target and Jefferies’ “sell” rating highlight the premium’s fragility.

For contrarians, the post-earnings dip to $105–$110 could represent a tactical entry point, provided the stock holds these levels. Bulls might argue that Palantir’s valuation will normalize over time as growth compounds, while bears see a bubble waiting to pop.

Ultimately, May 2025’s volatility underscores a stark truth: Palantir’s stock is a bet on the future of AI in enterprise software. Those willing to stomach extreme volatility for potential multi-bagger returns may find this a compelling entry, but the path forward hinges on whether the company can grow into its valuation—or if reality finally catches up.

In the end, the question remains: Is Palantir’s momentum real, or is its valuation a mirage? The answer could determine whether May 2025 becomes the buy point of a lifetime—or a cautionary tale of overvaluation.