Tech company Palantir Technologies (NYSE:PLTR) will release its third-quarter earnings on Tuesday. Year to date, the stock has underperformed the S&P 500, rising just 10% while the index has climbed 25%. However, there's nothing like a strong earnings report that could quickly get Palantir's stock soaring. But just how likely is it to rise on earnings day?
In three of the past four quarters, the company's earnings have come in better than analyst expectations (and one time it only met expectations). And Palantir needs a good showing given its high valuation. Palantir trades at a price-to-sales multiple of 31. By comparison, Adobe (NASDAQ:ADBE) trades at 21 times its revenue and Amazon (NASDAQ:AMZN) is at a multiple of less than four.
Investors are paying a significant premium for Palantir's stock. The expectation of high growth has many willing to look past its high price tag.
However, analysts aren't as optimistic of the stock delivering higher returns as many brokerages have price targets set at no higher than $25.
Unless Palantir blows past expectations in Q3, it could be tough for the stock to climb much higher than where it is today. The one good thing for the stock is that its 50-day moving average recently crossed over its 200-day moving average, otherwise known as a "Golden Cross," which can sometimes drive momentum. However, that alone isn't enough of a reason to buy the stock and investors may be better off waiting until after the earnings report to make a decision on Palantir.
Last time the company reported earnings, in August, the stock jumped more than 11% as revenue of $376 million beat Wall Street's projections of $352.3 million.
