Palantir Stock Price Forecast: Can Rising AI Software Demand Lead a Software Stock Recovery?

TradingKey - On August 4, Eastern Time, Palantir ( PLTR) saw its stock price break through the $150 mark after reporting second-quarter results. Palantir significantly raised its full-year revenue and profit guidance in this quarterly report, as strong demand from commercial customers exceeded market expectations.

Palantir raised its full-year revenue guidance to between $8.150 billion and $8.158 billion, a significant increase from the previous upper limit of $7.662 billion, and far higher than analysts' previous average estimate of approximately $7.7 billion.

During the period, revenue increased by 93% year-over-year to $1.94 billion, beating the expected $1.8 billion. Among this, US commercial revenue reached $764 million, representing a whopping 149% year-over-year increase. US government revenue reached $809 million, up 90% year-over-year. Adjusted earnings per share were 41 cents, beating the market expectation of 35 cents.

Following the earnings release, Citi analyst Tyler Radke maintained a "Buy" rating on Palantir and raised the price target from $200 to $245.

Citi pointed out that the company's second-quarter results far exceeded expectations, with total revenue growing 93% year-over-year, US commercial revenue and total bookings both reaching record highs, and profitability also setting a new record.

Other investment banks also raised their price targets. Deutsche Bank analyst Brad Zelnick upgraded Palantir to a "Buy" rating and raised the price target from $80 to $200. Jefferies analyst Brent Thill raised the price target on Palantir from $70 to $80.

More importantly, this earnings report also carries positive implications for the software sector. It proves that AI spending is beginning to transmit from chips, servers, and data centers to the software and application layers. Consequently, data platforms, AI workflow, cloud monitoring, and cybersecurity companies may gain more opportunities for valuation recovery.

Palantir stock price chart, Source: TradingView

Looking at the Palantir stock price chart, after rebounding from its interim low on June 25 ($106.37), the stock today temporarily broke through its previous sideways trading range and multiple short-to-medium-term moving averages, and climbed back above the 0.786 Fibonacci level ($151.43). The short-term trend has shifted from weak oscillation to a strong breakout.

The primary short-term support is the 0.786 Fibonacci level ($151.43), which also serves as the dividing line between strength and weakness following this breakout. If the stock can hold firm after a pullback, the strong breakout structure will be confirmed. This round of rebound is expected to shift from a recovery to another challenge of the previous high of $163.70.

If it breaks through the previous high effectively, the next target could be the 1.272 Fibonacci extension level of $179.29, with further upside pointing to the 1.618 extension level of $199.13. However, following the sharp single-day rally, the short-term deviation from the moving averages has widened rapidly, and the risk of chasing highs has increased accordingly.

If it falls back below $151.43, the credibility of the breakout will decrease significantly, and it may retest $141.80. On the other hand, the previous high of $163.70 remains an important overhead resistance and technical pressure zone; until this level is effectively breached, the market still needs to be wary of the volatility risk of a pullback after an intraday spike.