Is Palantir Stock About to Breakout?

That creates a relatively straightforward trading setup. A decisive breakout above $179 would clear the recent highs and could open the door to another leg higher. Meanwhile, the recent consolidation around $170–$179 gives traders a clear range to monitor.

The technical picture is particularly interesting because the breakout is being supported by improving fundamentals and rising earnings estimates.

Image Source: TradingView

PLTR Stock Gets Upgraded

Palantir reported another exceptional quarter recently, with revenue increasing 93% year over year and earnings climbing 225%.

Those results have driven another round of upward earnings estimate revisions. Palantir currently carries a Zacks Rank #1 (Strong Buy), with consensus earnings estimates rising nearly 8% across the board over the past 30 days.

Image Source: Zacks Investment Research

That estimate momentum matters. Some of the strongest stock trends occur when improving fundamentals and positive price momentum reinforce one another, and that appears to be happening with Palantir today.

Valuation remains the obvious concern. PLTR trades near 80x next year’s earnings, which is expensive on an absolute basis. However, that multiple has compressed substantially from the levels investors have historically paid for the stock.

For much of the past year, Palantir shares traded sideways while revenue and earnings continued to compound at very high rates. In effect, the business has been growing into the valuation even without a major advance in the share price.

Palantir's Expanding Role in AI

There may also be a broader fundamental catalyst emerging.

CEO Alex Karp has increasingly positioned Palantir as a differentiated AI platform for corporations and governments that want the benefits of artificial intelligence without giving up control of sensitive data, intellectual property or proprietary business information.

Karp has been particularly critical of the large AI labs and the potential risks associated with allowing proprietary information to become part of broader AI training systems. Palantir's pitch is effectively that enterprises can deploy advanced AI while maintaining much tighter control over their data.

There is evidence that customers are responding. Net dollar retention reached 157% in the latest quarter, indicating that existing customers are rapidly expanding their spending with Palantir.

That will be an important metric to follow. If customers continue moving deeper into Palantir's AI products, the company could increasingly establish itself as a core AI infrastructure layer across large corporations and government agencies.

Unity and Match Group: Two More Software Stocks Approaching a Breakout

Match Group (MTCH) is another software stock approaching an important technical breakout. Match Group carries a Zacks Rank #1 (Strong Buy) and has spent roughly three years building a large base, with shares now testing a long-standing area of resistance.

The fundamental setup is also attractive. Earnings estimates are moving higher, while Match Group trades at just 9.6x forward earnings. With long-term EPS growth projected at 20.66% over the next three to five years, the stock carries a PEG ratio of just 0.47.

Image Source: TradingView

Unity Software (U) is developing a similar setup. Unity carries a Zacks Rank #2 (Buy), has seen strong upward earnings estimate revisions and is also emerging from a roughly three-year technical base. Unity shares have rallied sharply in recent weeks and are now pressing against a major resistance level.

Despite the recent move, Unity still offers an appealing growth-adjusted valuation. The stock trades at 38.9x forward earnings, while long-term EPS growth is projected at 41.33%, giving Unity a PEG ratio below 1.

Image Source: TradingView

Together, Match Group and Unity provide further evidence that momentum is broadening across software, with both stocks approaching potentially significant technical breakout levels.

Is PLTR Stock Ready to Break Out?

Palantir now has several factors moving in the same direction: exceptional revenue and earnings growth, sharply rising earnings estimates, a Zacks Rank #1 and a potentially important expansion of its role within enterprise AI.

The technical setup adds another catalyst.

PLTR has already broken out of its much larger year-long pattern and is now consolidating near the highs. A move above roughly $179 would represent the next technical breakout and could signal the beginning of another leg higher.

The valuation remains rich, so this is not a low-risk setup. But with fundamentals improving and the stock pressing against clearly defined resistance, Palantir is one of the more compelling momentum setups in the market right now. The similar strength developing in Unity and Match Group also suggests that the move may be in part, driven by a broader improvement in software stocks.

7 Best Stocks for the Next 30 Days

Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."

Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention. 

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research