Bearish sentiment and bullish chart signals for Palantir

While overall sentiment remains significantly bearish for Palantir Technologies NYSE:PLTR, the company remains undeterred. Its shares are up nearly 50% year to date and more than 200% from a year earlier.

After spending the previous two months consolidating in a tight range post-earnings, the stock is poised for a potential move higher. However, it remains one of the lowest rated stocks, with good short interest and recent insider selling.

Bearish sentiment and bullish technical formations create an interesting scenario. The stock could continue to rise, partly due to overwhelming bearish sentiment.

So, let’s take a closer look at the stock’s fundamentals and technical form to see if PLTR could be headed for higher prices.

What is Palantir Technologies?

Founded in 2003 by well-known investors Peter Thiel and Stephen Cohen, Palantir Technologies is a SaaS company based in Denver, Colorado. It aims to revolutionize artificial intelligence and big data analytics and improve human intelligence.

Initially geared toward federal government applications, Palantir has expanded to serve state, local and private companies. It offers solutions such as Palantir Gotham, Apollo, Foundry, and Metropolis, with Gotham as its core offering. Gotham aggregates large data sets for rapid decision-making, although it has faced criticism for applications such as “predictive policing.” Apollo, recognized by the Department of Defense, provides secure Internet access across all operating environments, accelerating software development and deployment.

On February 5, Palantir released its quarterly earnings report, showing $0.03 earnings per share for the quarter, missing the consensus estimate of $0.04 by a cent. Revenue for the quarter was $608.35 million, compared to analysts’ estimates of $603.48 million. Palantir has a market capitalization of $55.87 billion.

Bearish sentiment

Sentiment surrounding the stock continues to be bearish, with a low rating and expected downside, healthy short interest, and recent insider selling.

Based on 12 analyst ratings, the stock has a Reduce rating, which has been in place for over a year. The consensus price target for the stock is $18.21, which projects a downside of nearly 28%, the most analysts have expected in over a year.

As of February 29, Palantir has seen consistent short interest, with 97 million shares, representing about 4.39% of the float, sold short. Despite a 5% month-on-month decline in short interest rates, levels remain notable. The dollar volume sold short is currently valued at $2.43 billion, indicating significant investor interest in betting against the stock’s performance. This level of short interest suggests a significant amount of skepticism or bearish sentiment about PLTR’s future prospects among investors.

Over the past 12 months, the company has seen a notable trend of internal sales, with no internal purchases recorded during this period. A total of 11 insiders collectively sold shares worth $280.24 million. Notably, in the first quarter of this year alone, insiders sold $184 million worth of shares, suggesting significant disinvestment of ownership stakes by individuals within the company. Most recently, on March 12, director Peter Thiel executed a substantial sale of 7,044,756 shares, for a total of $174,639,501. This transaction adds to the broader pattern of insider selling and highlights the notable level of insider activity surrounding PLTR, potentially influencing investor sentiment and market dynamics.

Amid the bearish sentiment, the chart remains bullish

Despite the prevailing bearish sentiment characterized by analysts’ Reduce ratings and notable insider selling, a technical analysis perspective reveals a potentially bullish outlook for the stock. Following the earnings report, the stock went through a two-month consolidation period above rising simple moving averages (SMAs) within a narrow range. If the stock were to successfully break out of this consolidation phase and break above resistance levels around $27, it could pave the way for significant upside momentum to emerge.

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