Palantir Technologies (NYSE:PLTR) investors probably don’t want to take a “set it and forget it” approach in August. That’s because Palantir’s valuation seems elevated and the company is about to face an important test. Thus, while the outlook is still generally favorable for Palantir stock, there’s no need to overload your portfolio now.

The smart strategy is to be watchful and keep any position size moderate. As we’ll discover, Wall Street’s experts don’t all agree about Palantir Technologies’ future prospects. Therefore, you’ll want to monitor Palantir and be prepared for a range of possible outcomes in the next few weeks.

Palantir: Bear vs. Bull Case

Mizuho analysts led by Gregg Moskowitz recently downgraded Palantir stock from “neutral” to “underperform.” This might surprise the Palantir Technologies bulls.

Apparently, the Mizuho analysts are concerned about Palantir’s valuation being too high. They wrote, “We find it increasingly difficult to justify Palantir’s high multiple,” and Palantir’s “valuation appears very stretched, and increasingly difficult to justify.”

Palantir Technologies has a GAAP trailing 12-month price-to-earnings ratio that’s above 200x. In contrast, the sector median P/E ratio is around 31x. So, value-focused investors might concur with the Mizuho analysts on this particular point.

However, Palantir Technologies has a near-term opportunity to justify its valuation. That’s because Palantir will release its second-quarter 2024 results on Aug. 5.

Palantir: An ‘Undervalued Story’?

As we discussed previously, the market’s response to Palantir Technologies’ imminent quarterly results could be “buy the rumor, sell the news,” but it could also be “buy the rumor, buy more on the news response.”

There’s no need to gamble on a particular outcome, so again, position sizing is crucial to your financial well-being.

Don’t get the wrong idea. Palantir Technologies is a highly successful company with lucrative government contracts. Besides, not every analyst is as cautious about Palantir as the Mizuho analysts are.

Indeed, Wedbush analysts recently reiterated their “outperform” rating on Palantir stock. They see Palantir Technologies as “well-positioned to continue capitalizing on this $1 trillion AI spending wave,” which is certainly a fair point.

Interestingly, the Wedbush analysts claim that the Palantir Technologies “story remains very undervalued and misunderstood.”

In light of Palantir’s aforementioned P/E ratio, some value-focused investors might disagree with the Wedbush analysts on this point. However, if Palantir delivers amazing second-quarter results, then valuation concerns may be less relevant for a while.

Palantir Stock: Keep Your Eyes Peeled

Palantir Technologies’ upcoming earnings event is high-stakes for the company and its investors. The company might or might not be able to justify its seemingly high valuation.

Hence, this is not the right time to take your eyes off Palantir Technologies. Paying attention and understanding the data will be crucially important for all investors in the coming days and weeks.

So, stay tuned for updates, manage your position size carefully and be prepared for a possible make-or-break moment with Palantir stock.

On the date of publication, Louis Navellier had a long position in PLTR. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.

The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.