Palantir Stock Nears Bear Market Territory - Why and What's Next?

Core Viewpoint - Palantir Technologies Inc. (PLTR) is officially in a bear market, defined as a drop of more than 20%, raising concerns among retail investors who purchased during its previous rise [1] Group 1: Institutional Involvement - The inclusion of Palantir in the S&P 500 and its switch to the NASDAQ exchange significantly drove its growth in the second half of 2024, compelling institutional investors to engage with the stock [1] - The current sell-off in PLTR stock is largely attributed to institutional investors, who are now looking to buy at better prices after previously ignoring the stock when it was valued lower [2][4] Group 2: Financial Performance - Over the last 12 months, Palantir's revenue increased from 12% to 36%, and its free cash flow margin rose from 6% to 55%, indicating strong financial performance despite the stock's decline [3] - Palantir's market capitalization is approximately $196.65 billion, based on trailing 12-month revenue of around$2.6 billion, suggesting a high valuation that factors in significant future growth [3] Group 3: Government Contracts and Efficiency - Concerns arose regarding the U.S. Department of Defense reallocating about 8% of its budget, as Palantir generates over 50% of its revenue from federal contracts, primarily from the DOD [5] - Despite potential budget cuts, there is sentiment that Palantir may benefit from a focus on efficiency, aligning with the company's product offerings designed to enhance operational efficiency [6] Group 4: Stock Performance and Analyst Ratings - Palantir stock is trading near its 50-day simple moving average (SMA), and if it falls below this level, it could drop to around $73, which aligns with analysts' consensus price [8] - Loop Capital initiated coverage on Palantir with a Buy rating and a price target of$141, indicating potential for recovery despite the current sell-off [9]