Down 40%, Should You Buy the Dip on Palantir?

Core Viewpoint - Palantir Technologies has experienced significant stock price fluctuations, currently down 40% from its all-time highs, but only 2% year-to-date, raising questions about whether it is a good time to invest in the stock [1] Group 1: Business Impact and Growth Opportunities - Palantir's business is not directly affected by tariffs as it does not sell or manufacture physical goods subject to tariffs [2] - There is potential for increased demand for Palantir's solutions that optimize supply chains in response to tariff impacts, as well as for its AI solutions that help reduce costs [3] - The company is witnessing strong growth in demand from the U.S. commercial sector for its AI platform, focusing on becoming an AI operating system rather than just building AI models [4] - Palantir has a significant revenue growth opportunity as it transitions new commercial customers from proof-of-concept to production [5] - The company markets its manufacturing operating system, Warp Speed, as a tool for American re-industrialization, presenting another growth opportunity [6] Group 2: Customer Base and Government Relations - The U.S. government is Palantir's largest customer, accounting for over 40% of its revenue in 2024, and current tariffs do not affect this relationship [7] - However, potential budget cuts mandated by the Trump administration for the Department of Defense could impact Palantir, as it is closely tied to this sector [7] - The effects of the Department of Government Efficiency initiatives on Palantir remain uncertain, with potential for both negative and positive impacts [8] Group 3: Valuation and Investment Considerations - Despite the stock price drop, Palantir's valuation remains high, with a forward price-to-sales (P/S) multiple of 46 times based on 2025 estimates and 36 times for 2026, significantly above historical SaaS multiples [9] - The unique approach to AI positions Palantir for long-term value creation, similar to how owning operating systems has benefited companies like Apple and Microsoft [10] - The company must maintain strong revenue growth to justify its current valuation, and investors may consider taking a small position while awaiting better buying opportunities [11]