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Palantir Technologies Stock Is Dropping Like a Rock. Should You Start Buying?
PLTRPalantir Technologies(PLTR) The Motley Fool·2025-03-01 09:30

Core Viewpoint - Palantir Technologies experienced a significant stock surge of over 60% in early 2025, reaching a 52-week high on February 18, but has since seen a rapid decline of 28% in value due to concerns over potential Pentagon budget cuts and CEO stock sales [1][2]. Group 1: Stock Performance and Market Reaction - Palantir's stock has dropped 28% since its peak on February 18, primarily due to fears surrounding a potential reduction in the Pentagon's budget and CEO Alex Karp's plan to sell over 1.2billioninstock[2].−Thestock′sdeclineisnotsurprisinggivenitsexpensivevaluationandtheupcomingquarterlyreport,whichmayleadtocontinuednegativesentimentintheshortterm[3].Group2:PentagonBudgetImplications−ThePentagon′sbudgetreductionaimstocutfiscalfraudandwastewhilerefocusingoncriticalareas,whichmaynotnegativelyimpactPalantir,assectorslikemissiledefenseandcybersecurityareexpectedtoremainfunded[5].−InQ42024,551.2 billion in stock [2]. - The stock's decline is not surprising given its expensive valuation and the upcoming quarterly report, which may lead to continued negative sentiment in the short term [3]. Group 2: Pentagon Budget Implications - The Pentagon's budget reduction aims to cut fiscal fraud and waste while refocusing on critical areas, which may not negatively impact Palantir, as sectors like missile defense and cybersecurity are expected to remain funded [5]. - In Q4 2024, 55% of Palantir's revenue was government-related, making the company's stock sensitive to changes in defense spending [6]. Group 3: Growth Opportunities - Despite potential budget cuts, Palantir's focus on efficiency and its AI Platform (AIP) could benefit from the Pentagon's strategy, as AIP enhances decision-making and operational efficiency for both commercial and government clients [7]. - Palantir's government revenue grew by 40% in the last quarter, outpacing the 31% increase in commercial revenue, indicating strong demand for its services [8]. Group 4: Commercial Business Expansion - Palantir's commercial business is thriving, with a 52% increase in customer count to 571 last year, suggesting a robust growth trajectory [12]. - The remaining deal value, which represents the total value of contracts yet to be fulfilled, increased by 40% to 5.4 billion, indicating that Palantir is securing more contracts than it is currently fulfilling [13]. Group 5: Investment Considerations - The recent stock pullback has made Palantir's shares slightly less expensive, but the company still commands a significant premium [14]. - Accumulating Palantir stock may be advisable if the price continues to decline, as the company is positioned in the rapidly growing AI software market, which could support its high valuation in the future [15].