Wall Street has high expectations for Palantir Technologies Inc. (NYSE: PLTR) when it reports fourth-quarter and full-year results on February 5. The data analysis and data-mining software maker is forecast to earn eight cents a share on revenue of $603.48 million for the fourth quarter.

Those would double earnings from the year-ago quarter and mark a 19% revenue increase.  

But analysts aren't universally optimistic about the stock's prospects, which may be causing some selling. In particular, investors and analysts are fretting about a decline in revenue from the federal government. 

The Palantir chart shows the stock gapping up by 4.89% on January 22, although with subsequent selling, it's given up those gains. However, Palantir stock is finding support near its 10-day and 21-day moving averages, converging bullishly as the 10-day is about to cross over the 21-day line.

Bullish moving-average crossover

When a short-term moving average crosses above a line, tracking a longer period, it signals a bullish trend. 

This crossover suggests that recent price trends are gaining strength, indicating increased buying momentum. 

The Selling in Palantir the week of January 22 didn't track with any selling in either the broad market or technology stocks in the Technology Select Sector SPDR Fund (NYSEARCA: XLK). 

Palantir is not tracked within the S&P 500, as it's a new stock, having gone public in 2020. Its market capitalization of $36.18 billion puts it in the large-cap category. 

However, due to Palantir's size, the SPDR S&P 500 ETF Trust (NYSEARCA: SPY) and tech sector stocks are appropriate benchmarks.

So, what's next for the stock in light of upcoming earnings? 

Mixed track record of beating Wall Street views

In addition to the triple- and double-digit gains expected for the fourth quarter, the company is expected to grow earnings by 312% to 25 cents per share for the full year.

Palantir earnings data show the company has a mixed record regarding meeting, beating or missing analyst views.

The company has three principal software platforms: Gotham, Foundry and Apollo. 

Gotham's customer base is global defense agencies, intelligence communities, law enforcement, disaster relief organizations and others.

Recently launched AI platform

Corporations and enterprise users use Foundry to share data and analytics.

Apollo is a cloud-based system that allows users to write code once and deploy it throughout multiple environments. 

In 2023, the company launched its artificial intelligence platform (AIP), allowing customers to launch AI across multiple applications within days.

Cloud computing and AI are red-hot growth industries, and analysts are upbeat about Palantir's earnings growth. This year, the Wall Street estimate calls for a 17% increase in net income to 29 cents a share.

Nonetheless, Palantir analyst forecasts show a consensus view of "reduce," which you don't see very often, especially for a company expected to grow earnings by 17% in the current year.

Analysts' price target is $13.18, a downside of 20%. 

Concern about federal government contracts

So what's going on here? 

At the recent World Economic Forum in Davos, Switzerland, Palantir CEO Alex Karp told The Wall Street Journal that the federal government, which accounts for about 43% of the company's revenue, is a "cyclical and difficult" business. He added that government revenue isn't as reliably steady as private enterprise. 

On January 5, Jefferies downgraded Palantir stock from "hold" to "underperform" and lowered the price target from $18 to $13. 

The issue was related to Karp's comments about the federal government: Palantir is currently in a disagreement with the U.S. Army over data ownership. 

Underestimated the severity of slowdown

In his recent research note, Jefferies analyst Brent Thill wrote, "We underestimated the severity of the slowdown in Palantir's commercial and government businesses, which has resulted in a longer-than-expected demand recovery that could continue to constrain growth through 2024." 

The Army contract was recently renewed, but skepticism about Palantir’s AI business remains.  

In an interview with Yahoo Finance, Thill said Palantir’s AI “hype is ahead of the reality."