Prediction: Palantir's Stock Will Make a Huge Move on Aug. 3

Palantir (NASDAQ: PLTR) has been on a steady downward slide since achieving an all-time high in October of last year. It recently dipped around 35% from its all-time high, which many investors may view as a buying opportunity.

After all, Palantir is one of the companies bound to benefit from the massive expansion of artificial intelligence (AI), and its soaring revenue backs up that sentiment.

Palantir is slated to report its second-quarter results on Aug. 3, and I think the stock could have a huge move after earnings. But the question is, will it be up or down?

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Palantir must exceed expectations

Palantir has been involved in AI for longer than most companies. It started in the early 2000s as an AI-first business that used AI to make sense of data. Originally deployed as a government-only software, it eventually found usage on the commercial side of the market. Now, both sides are extremely important and have helped lead to some impressive growth figures in Q1.

In Q1, overall revenue rose 85% year over year. Palantir gave Q2 guidance for $1.797 billion to $1.801 billion, but the company has a consistent track record of exceeding internal expectations. Wall Street analysts still haven't caught on to this trend, and expect $1.81 billion in revenue, indicating about 81% growth. Palantir will likely grow in that 80% range this quarter, or even get up to 90%, but it may not be enough.

Despite the huge sell-off, Palantir's stock trades for a sky-high price tag.

PLTR PE Ratio data by YCharts

For a company like Palantir, trading at a 40 times earnings multiple is fairly reasonable. That means Palantir must nearly quadruple its earnings from this point to achieve a reasonable valuation. I don't think that's an impossible task, but it could take several years.

If Palantir's revenue growth continues to accelerate past Q1's 85%, the stock could stay put or move slightly higher. However, if it falls below that level, as it's projected to do, the market may start to panic and dump shares. That's not a great scenario, and it puts Palantir up against the wall to continue producing impressive growth figures.

This could spell trouble for the stock, and I think there could be a big move down following Q2 earnings. Palantir as a company is impressive, but the stock is just too expensive to merit investing in right now.

Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.