In three days, Palantir has shed $50 billion in market capitalization.
On Feb. 19, Palantir stock fell by 10.1% on news of Pentagon budget cuts and CEO Alex Karp’s stock sale plan. The stock lost another 5.2% and 4.6% in the following two sessions.
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Palantir Technologies (PLTR) is mainly known for providing AI-driven software to the U.S. military and government.
In early February, the company reported a fourth-quarter beat and offered better-than-expected guidance for Q1, which led to a 23% surge during the following trading session.
Palantir surged 340% in 2024 and was the top performer in the S&P 500 for the year. The stock is trading at a forward price-to-earnings multiple of 178.57, while the number for Nvidia (NVDA) is 31.45, according to Yahoo Finance’s data. This means Palantir stock is much more expensive than even the most dominant AI company.
Given Palantir’s sharp surge and high valuation, key client’s budget cuts and the CEO’s stock sale plan have raised concerns about potential weakness.
Wall Street expects more downside for the stock. Analysts have an average price target of $85.11 for Palantir, implying a 16% drop from Friday’s close.
Meanwhile, fund managers are already selling.
Adam Turnquist, LPL Financial’s Chief Technical Strategist, analyzed the 13-F filings of U.S. hedge funds and found that managers have slashed holdings in Palantir, reducing allocations by 28.8 million shares in Q4 2024.
Veteran fund manager criticized Alex Karp’s recent interview
Palantir co-founder and CEO Alex Karp showed up on CNBC on Feb. 18. He talked about the new book “The Technological Republic” he co-authored, his thoughts on President Trump, Elon Musk, and more.
Karp said, “We are in a software-defined world, and the nation that leads software is the U.S.A.”
Related: Veteran stock trader’s latest Palantir move turns heads
Doug Kass, a longtime hedge fund manager, criticized Karp’s recent CNBC appearance. He said it “was nothing more than some ‘double talk’ and a bunch of softball questions from complicit moderators.”
Kass’s career dates back to the 1970s at Putnam and includes a stint as director of research at billionaire Leon Cooperman’s Omega Advisors.
“The Karp interview reminded me of CNBC’s pathetic interview of Sam Bankman-Fried, weeks before it was discovered his company, FTX, was a Ponzi scheme,” Kass said.
He explains that he is not suggesting that Palantir is a Ponzi scheme at all, but rather, he is disappointed with Karp’s interview because it lacks “meaningful and value-added” content.
Kass correctly anticipated Palantir’s fall. He said he had a short position in Palantir and covered during the recent sell-off.
Analysts mixed on Palantir stock
Several analysts have updated their views on Palantir after the sell-off.
Wedbush analyst Daniel Ives reiterated an outperform rating and a $120 price target, calling the sell-off a buying opportunity.
“Palantir’s unique software approach positions it to gain more IT budget dollars at the Pentagon, not less. The company is well suited for this new disciplined spending environment, and as defense programs are reevaluated, Palantir could secure a larger role in government IT spending,” the analyst said.
“We believe Palantir is on track to become the next Oracle or Salesforce, potentially reaching a $1 trillion market cap in the coming years,” he added.
However, William Blair analysts led by Louie DiPalma reiterated their underperform rating, Barron’s reported.
The analyst said Palantir’s U.S. government business experienced a pronounced revenue deceleration in 2021 and 2022, and “there is high risk of this happening again.”
Fund manager buys and sells:
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- Cathie Wood buys $37 million of surging tech stock
“A sharp revenue growth deceleration would likely result in valuation multiple contraction,” he warned, adding that there could be more than 20% downside to the shares over the next few years.
Palantir closed at $101.35 on Feb. 21 and remains up 34% year-to-date, despite the recent sell-off.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
