Should You Buy Palantir Stock Ahead of Q1 Earnings Report?

Palantir Technologies Inc. PLTR will report its first-quarter 2025 results on May 5, after the bell.

The Zacks Consensus Estimate for earnings in the to-be-reported quarter stands at 13 cents, indicating 62.5% growth from the year-ago reported quarter. The consensus estimate for total revenues stands at $862.9 million, indicating 36% year-over-year growth. There has been no change in analyst estimates or revisions lately.

The company has an impressive earnings surprise history. Earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and matched once, with an earnings surprise of 12.7%, on average.

PLTR’s Lesser Chance of Q1 Earnings Beat

Our proven model doesn’t conclusively predict an earnings beat for PLTR this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

PLTR has an Earnings ESP of 0.00% and a Zacks Rank #5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank stocks here.

PLTR’s All Round Healthy Business Should be the Driver in Q1

We expect a significant year-over-year improvement in the company’s top line in the to-be-reported quarter, driven by healthy business from existing as well as new customers, strengthening both the Government and Commercial segments.

The consensus estimate for Government revenues is pegged at $454 million, indicating 35.5% year-over-year growth. The consensus mark for Commercial revenues is pegged at $399 million, indicating 33.4% year-over-year growth.

PLTR Stock Looking Pricey

Palantir shares have surged a whopping 52% year to date. This performance has significantly outpaced the 6% decline of its industry and the Zacks S&P 500 composite. Interest in this prominent AI-focused stock remains strong as investors seek opportunities to capitalize on the trend.

Meanwhile, heavyweight tech stocks like Nvidia NVDA and Oracle ORCL have not been as fortunate. Nvidia, a leading force in AI and graphics processing technology, has recorded a 19% drop so far this year. Similarly, Oracle, renowned for its enterprise software and cloud infrastructure services, has declined 15% year to date.

At this moment, it is worth noting that at its current valuation, Palantir is looking pricey. Based on training 12-month EV-to-EBITDA, PLTR is currently trading at 1491.5X, way above the industry’s 12.35X. If we look at the forward 12-month Price/Earnings ratio, the company’s shares are currently trading at 191.93X forward earnings, well above the industry’s 34.12X.

Investment Considerations

Although PLTR is expected to report year-over-year growth in first-quarter earnings and revenues, its stock looks overvalued compared to industry peers. Recent analyst trends and a weak earnings prediction model also point to cautious sentiment around the stock. While PLTR’s government and commercial businesses remain strong, its high valuation leaves little room for error. Given the stock’s sharp rally this year and stretched pricing, there is an increased risk of a pullback if expectations are not met. Investors may find it prudent to sell PLTR at current levels and protect gains amid potential volatility.

PLTR currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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