Palantir Stock Is Down 20% This Year, but That Could All Change on May 4. Are You Ready?

Palantir Technologies (NASDAQ: PLTR) is either ahead of the game in artificial intelligence (AI) or exposed to competition, depending on who you ask. Likewise, it also might continue to offer life-changing stock gains, or be at the beginning of a mudslide. Certainly it started 2026 on the wrong foot -- it's down about 20% year to date. But that could all change on May 4, when the company is scheduled to report 2026 first-quarter earnings.

Priced for perfection

In one scenario for Palantir, everything goes right, and the stock jumps. And that really means everything, because a premium-priced stock carries high expectations. Even at its now-lower price, Palantir stock trades at a P/E ratio of 226, an eye-popping valuation.

Image source: Getty Images.

What would everything going right entail specifically? It's more than sales and earning growth; many companies that can provide that trade at much lower valuations. This P/E ratio only makes sense in the context of very high, and possibly accelerating growth. Consider how things have looked over the past four quarters:

Data source: Palantir quarterly reports. Growth is year over year.

In the fourth quarter, it sealed 180 deals of at least $1 million and 61 deals worth at least $10 million, and it ended the quarter with a record $4.3 billion in total contract value. The market is going to want to see similar data, if not more of these deals, and higher contract value as the company gains traction in the U.S. commercial sector. That's where its greatest growth has been coming from recent, as more businesses come to understand the value of what its platform can provide.

To summarize it briefly, the company uses artificial intelligence (AI) to organize data from many disparate sources, analyze it, and produce insights from it that can help management make better decisions.

If Palantir's growth keeps accelerating, specifically in its U.S. commercial business, there's a good chance that its stock will rebound.

The other scenario

However, if its Q1 results aren't flawless, the stock could slide further. There are many factors that might affect the market's reaction beyond accelerating growth. These include management's outlook and updates about the company's products. While Palantir has a first-mover edge in its space, there are many digitally native data analytics companies that could offer it some competition, Snowflake and C3.ai among them.

Wall Street is expecting revenue to increased 74% over last year in the first quarter, a lower rate of acceleration (yes, that could matter), and $0.28 in adjusted earnings per share, up from $0.13 per share in the prior-year period. Palantir typically beats Wall Street's expectations.

Any stock with an unusually high valuation tends to be susceptible to wider near-term volatility; in such cases, it's more important to focus on the five- and 10-year outlooks. Palantir has a rapidly expanding and proprietary platform, and it's hard to imagine that it won't be a significantly bigger company in 10 years than it is today, with a stock price to match. However, it's also not hard to imagine a scenario that provides better entry points down the road, even if the stock jumps after it reports first-quarter earnings.

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies and ServiceNow. The Motley Fool recommends C3.ai. The Motley Fool has a disclosure policy.