Palantir Stock Fell Nearly 40% From Its High. History Says This Will Happen Next.

Core Insights - Palantir Technologies was a top-performing AI stock in 2024, with shares soaring 340% and peaking at $125 per share in February 2025 before facing a decline due to concerns over defense budget cuts and potential tariffs impacting the U.S. economy [1][2] - The stock experienced a significant drop of nearly 40$828 million, with a 43% rise in customers to 711 and a 20% increase in average spend per existing customer [7] - The company achieved a non-GAAP net income increase of 75% to $0.14 per diluted share and guided for 36% revenue growth in the first quarter [7] - Palantir's stock has a current price-to-sales (P/S) ratio of 72, significantly higher than its historical average of 25 [12] Competitive Position - Palantir has a competitive advantage through its ontology-based software architecture, which links digital data to real-world objects, enhancing decision-making capabilities [6][7] - The company is recognized as a leader in AI and machine learning platforms, with significant growth expected in the AI platform market, projected to increase by 40% annually through 2028 [8] Valuation Concerns - Palantir's peak P/S ratio reached 106 in February, raising concerns among analysts about its valuation [10] - Historical analysis indicates that stocks with a P/S multiple over 100 have typically experienced declines of at least 73%, suggesting potential risks for Palantir if it follows a similar trajectory [11] - Despite being an excellent business, the current valuation may not justify investment, as the stock is not necessarily cheap even after a 33% decline from its record high [12]