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Palantir shares fell 10% amid concerns over potential US military budget cuts.
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The US Defense Secretary ordered budget cuts, sparking investor worries.
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Palantir’s high valuation and its CEO’s share sale plan add to market jitters.
The move:
Palantir Technologies shares tanked 10% on Wednesday to $112.06 apiece. The loss extended to after-hours trade, falling another 5.2%.
The slump ended a four-day winning streak for Palantir, whose stock had, until Wednesday, surged 65% this year. Palantir shares are now up 48% this year to date and the company’s market value is around $255 billion.
A major US defense contractor, the data analytics company’s clients also include allied governments and the private sector. Its stock surged over 300% in 2024.
In early February, Palantir reported $827.5 million in revenue in the fourth quarter, beating analysts’ expectations of $775.9 million. Profit was 14 cents per share.
The chart:
Why:
Palantir’s share price was hit by reports that US Defense Secretary Pete Hegseth has ordered budget cuts.
Robert Salesses, the interim deputy secretary of defense, said in a Wednesday statement that Hegseth directed the Pentagon to identify around $50 billion in programs that could be cut next year. That money would be redirected to programs aligning with President Donald Trump’s priorities.
On the same day, Palantir disclosed in a regulatory filing that CEO Alex Karp has adopted a new trading plan that will allow him to sell up to nearly 10 million shares through September 12.
Karp, who owns about 2.5% of the company, has sold shares before this, too.
What it means:
The plunge in Palantir’s stock reveals investor jitters about how the US government’s budget cuts could hit the company’s bottom line.
It also highlighted existing concerns about Palantir’s valuation after an extended rally.
Even before Wednesday, analysts had voiced concerns about Palantir’s valuation, flagging risks for its stock price despite solid results.
“Given its strong positioning and execution, there’s no denying that PLTR is deserving of a premium valuation,” wrote Gregg Moskowitz, an analyst at Mizuho, in early February.
“However, valuation cannot and should not be irrelevant, and we find it exceedingly difficult to justify PLTR’s multiple that in our view already discounts significant further acceleration and upside versus consensus expectations,” Moskowitz added.
What the pros are saying:
Palantir stock has five buy ratings, 13 holds, and five sells, according to the Eikon database.
