Palantir Drops 25% Despite 70% Revenue Growth as Investors Flee Sky High Valuation

Core Viewpoint - Palantir's stock has dropped 25.5% over the past month despite reporting a 70% total revenue growth and a 137% increase in U.S. commercial revenues, raising concerns about its high valuation and sustainability [1]. Revenue Growth - Palantir reported a total revenue growth of 70% and a 137% increase in U.S. commercial revenue for Q4 2025 [1]. Valuation Concerns - The company's stock trades at a P/E ratio exceeding 200 and a price-to-sales ratio of 68.77, leading to concerns about its valuation [1]. - UBS has reduced its price target for Palantir from $205 to $180 while maintaining a Neutral rating, citing caution on valuation despite acknowledging the company's strong performance [1]. Investor Sentiment - Retail investor sentiment has shifted from bullish to bearish, with notable discussions on Reddit highlighting concerns about insider selling, political risks, and extreme valuation multiples [1]. - Multiple executives sold shares during the stock's decline, with no insider purchases to indicate confidence at lower prices [1]. Political and Budget Risks - Investors are worried that shifting government spending priorities could threaten Palantir's 66% growth in U.S. government revenues, which heavily depend on Department of Defense contracts [1]. Technical Analysis - Palantir's technical chart shows an RSI of 31.35, indicating it is approaching oversold territory, yet analysts maintain a consensus price target of $176.38, suggesting a potential upside of 32.46% [1]. - The wide range of forecasts for Palantir's fair value, from $50 to $260, reflects significant disagreement among analysts [1]. Comparison with Peers - Snowflake, a peer in data analytics, trades at more modest multiples despite having a similar AI positioning, emphasizing Palantir's premium valuation [1].