Palantir Technologies ((PLTR Quick QuotePLTR - Free Report) ) delivered strong Q1 2025 results, with revenue rising 39% year-over-year to $884 million and adjusted EPS meeting expectations at $0.13. The company raised its full-year guidance, projecting revenue between $3.89 billion and $3.90 billion, surpassing analyst estimates.

Despite the strong earnings report, Palantir stock is down 13% as of this writing. After a staggering 1,200% run over the past two years and with the stock now trading at an eye-watering 200x forward earnings, some investors appear to be taking profits, while others are rotating into more reasonably priced alternatives.

While Palantir still boasts robust long-term growth projections, with earnings expected to grow over 30% annually over the next three to five years, recent estimate downgrades have earned it a Zacks Rank #4 (Sell) rating, signaling caution in the near term. Though I agree with the cautious outlook going forward, below, I will share a tactical trading setup for investors who may want to stay involved in PLTR stock.

Image Source: Zacks Investment Research

How Palantir Became an AI Darling and Cult Stock?

Palantir has quickly evolved into one of the market’s most iconic “cult stocks,” drawing comparisons to Tesla in its earlier hyper-growth phase. Its more than 10x gain in just two years reflects not only investor enthusiasm for artificial intelligence but also the company’s unique and mysterious positioning, which seems to draw even more allure.

The company’s Gotham and Foundry platforms are widely regarded as best-in-class for data integration and mission-critical decision-making. These tools are now deeply entrenched in both government agencies and the private sector, helping Palantir secure long-term, sticky contracts with entities like the US Department of Defense and Fortune 500 companies.

This combination of perceived technological superiority and long runway for AI adoption has drawn in a deeply loyal investor base, many of whom continue to buy regardless of valuation. At over 200x forward earnings, Palantir’s stock is priced beyond many other growth stock peers and is entirely untenable for valuation-oriented investors.

That said, for long-term believers in Palantir’s vision, or for those simply looking to ride the waves of momentum, the story remains compelling. Few companies are as directly leveraged to the AI theme as Palantir, and its narrative continues to attract retail and institutional attention.

For investors willing to take a tactical approach, there may be opportunities to participate in the stock’s next leg — without committing capital at the top. I’ll outline a potential technical setup in the following section.

Palantir Stock Tactical Setup

Palantir Technologies stock has now carved out a very wide range, between $65 and $125. Within the range, you can see a bullish wedge setup I highlighted a few weeks ago, from which the stock rallied aggressively, before bumping into this upper bound of resistance and the prior record high price.

For investors with an eye towards technicals and are interested in getting involved in PLTR stock I see two primary options. Right now, there is no point in buying new shares within this very broad range. But, if the sell-off continues, the lower bound of $65, which is admittedly quite far away, offers a level that has clearly seen considerable buying. Down at $65 gives a much better risk-reward opportunity than buying here.

Alternatively, for those unafraid to trade momentum and buy breakouts, though less likely, I still consider it possible that the stock recovers from here, consolidates and breaks out to new highs again. In that case, a breakout above $125, with tight risk management would be another way to get involved.

Image Source: TradingView

Should Investors Buy Shares in PLTR?

At current levels, buying Palantir shares appears to carry significant risk. With its stretched valuation and sentiment-driven gains, much of the intermediate-term upside may already be priced in. However, while some investors may find it absurd, the stock could continue to rally, just as it did over the past two years and despite persistent claims it was overvalued.

That said, the Zacks Rank #4 (Sell) is a red flag. It reflects a trend of downward earnings estimate revisions, which could keep selling pressure intact in the near term. If that weakness persists, and I think that’s the more likely scenario, investors might consider targeting a lower support level before initiating a position.

More importantly, I believe any new long position should be confirmed by an improvement in the Zacks Rank. It was a useful signal earlier in Palantir’s run, and if the stock is set to rally again, I would expect the Zacks Rank to flash that signal once more. Patience and discipline are key here.