Palantir Technologies (PLTR) -) stock surged higher in the second quarter because of growing optimism over its artificial intelligence prospects. However, shares have performed much worse since mid-July, falling from above $20 per share to below $14 per share near the end of September.
The 32% sell-off in Palantir likely took many by surprise. However, it didn't surprise Real Money analyst Bruce Kamich. Kamich, who has analyzed stocks professionally for over 50 years, wrote on Aug. 7, "Traders who are long Palantir should nail down profits" and "look for a re-entry area in the months ahead."
Given Palantir's drop, listening to Kamich's advice would have been wise. But what about now? Kamich recently updated his analysis, including a new stock-price target.
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Palantir rides an AI wave
OpenAI's roll-out of ChatGPT last December was a tipping point for artificial intelligence adoption. The generative AI program showed just how easily large language models can digest, interpret, and report large datasets, opening the doorway to potential applications across industries.
The potential for AI applications to reshape how people work and businesses operate has fueled a gold rush of investment reminiscent of the Internet Age in the 1990s.
Related: Cathie Wood sinks $10.5 million into surging tech stock, continues trimming top holding
Finance companies are developing AI programs to hedge risks, evaluate loans, and price products. Healthcare companies are investing its use in predicting drug targets and clinical trial outcomes. Manufacturers are seeking to use it to boost production and quality. AI can also help retailers better forecast demand and manage inventories.
There's seemingly no limit to the potential business use cases, and that's excellent news for Palantir.
Palantir is an expert in providing solutions that make sense of vast databases for enterprises and governments. Recently, it's turned its expertise toward solving complex AI problems for its customers, fueling interest and, potentially, sales growth.
"The demand for [Artificial Intelligence Platform] AIP is unlike anything we have seen in the past twenty years," said CEO Alan Karp this summer. "We are currently in discussions with more than three hundred additional enterprises to deploy AIP within their organizations, all of which are searching for an effective and secure means of adapting the latest large language models for use on their internal systems and proprietary data."
The increased customer interest is evidenced by Palantir's being awarded a new AI contract with the U.S. Army on Oct. 10, worth up to $250 million through 2026.
More Business of AI:
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- The company behind ChatGPT is now facing a massive lawsuit
The potential for more deals like this is fueling Wall Street optimism.
Analysts expect Palantir to report sales of $555 million in Q3, up 18% from one year ago. If that forecast pans out, it would represent an acceleration of the 13% year-over-year growth recorded in the second quarter.
Those same analysts expect Palantir's revenue to total $2.2 billion this year, up 16% from last year, before growing an additional 19% in 2024 to $2.63 billion.
Importantly, Wall Street expects Palantir's AI gambit will improve its profitability, too. They're targeting earnings of 27 cents per share next year, up 17%.
Palantir's price charts suggest a new target
Kamich is a technical analyst with a knack for dissecting price and volume action and calculating price targets using point-and-figure charts.
His recommendation to sell Palantir shares in August was based on his analysis of price and volume trends and technical indicators, such as the moving-average convergence divergence oscillator.
Kamich reviewed Palantir's daily and weekly charts for new insight on Oct. 10 and updated his point-and-figure price targets.
"Shares declined sharply in August but managed to regroup in September and make a short-term upside breakout in October," wrote Kamich. "The On-Balance-Volume (OBV) has been strong and is at or close to a new high for the move up. A rising OBV line tells me that traders of PLTR have been more aggressive buyers than sellers. The Moving Average Convergence Divergence (MACD) oscillator is now crossing above the zero line for an outright buy signal."
The strength of the daily chart isn't yet reflected in Palantir's weekly charts, though.
"In the weekly Japanese candlestick chart of PLTR, I see a mixed picture. The shares have turned upwards recently, but the trading volume has not expanded with the price rise. Old-time chart readers (present company included) find that bothersome," wrote Kamich. "A breakout over $20 on strong volume is needed to convince me that prices have launched a new leg higher."
Shares aren't too far from that hurdle, trading near $18.
A move above $20 would likely lead Kamich to calculate new price targets, but as it stands currently, daily and weekly point-and-figure charts suggest shares could climb to $22, up over 20% from current levels.
Nevertheless, Kamich favors a cautious approach to the stocks until Palantir clears $20. He concludes, "PLTR has rallied, but I don't see it (at this point in time) breaking through the $19-$20 area."
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