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When one of the world’s most successful investors makes a significant move, it inevitably draws attention from the financial community. Billionaire Stanley Druckenmiller, a legendary figure in the investment world, has built a reputation for his sharp instincts and unrivaled track record, including an average annual return of 30% with no losing years during his time managing Duquesne Capital Management.
A 13F filing released in mid-November showed that Druckenmiller offloaded more than 90% of his stake in Palantir Technologies (PLTR) during the third quarter, a move that has sparked intense speculation and debate among investors and analysts alike. Palantir, known for its sophisticated data analytics platforms, has been a polarizing stock, with its high valuation and rapid growth attracting both staunch supporters and skeptical critics.
In this article, we’ll examine the potential reasons behind Druckenmiller’s divestment and whether investors should consider following his lead. We’ll also consider the company’s fundamentals, its valuation metrics, and sentiment in the options market. Let’s dive deeper and find out if it’s time to give up on Palantir or if the stock still has room to soar.
About Palantir Technologies Stock
Palantir Technologies Inc. (PLTR) develops and deploys software platforms for the intelligence community, commercial enterprises, and government entities around the globe. It offers a range of platforms, such as Palantir Gotham, Foundry, Apollo, and the Artificial Intelligence Platform. Its market cap currently stands at $187.7 billion.
The analytics software provider delivered outstanding returns in 2024, fueled by growing demand for its artificial intelligence platforms. PLTR stock skyrocketed 379.8% this year.
Druckenmiller Sells 95% of Palantir Stake
Billionaire Stanley Druckenmiller may not be as well-known as Warren Buffett, but he is one of the greatest investors of all time. A protege of George Soros, he managed the Duquesne Capital Management hedge fund for about three decades, achieving an average annual return of 30% without a single losing year - a remarkable track record. Although Druckenmiller retired as a hedge fund manager after closing his fund in 2010, he continues to invest through the Duquesne Family Office, which holds nearly $3 billion in assets under management (AUM).
During the third quarter, Stanley Druckenmiller and his team completely sold off or reduced their holdings in more than three dozen stocks, with Palantir Technologies being the most notable. According to the latest 13F filing, Duquesne started the quarter holding around 770,000 shares of Palantir and ended it with just 41,710 shares, a reduction of approximately 95%. Investors might be curious about the reasons behind that move.
First, it’s important to note that Duquesne’s top 10 positions have been held for an average of just two quarters, while its entire portfolio of 75 holdings, as of the end of September, has an average holding period of only 2.33 quarters. Given that Druckenmiller’s fund initiated its position in Palantir during the fourth quarter of 2023, the most logical explanation for the reduction is profit-taking.
I don’t believe this rapid divestment stems from any fundamental issues with the business. As I mentioned in my previous article about Palantir, the company is firing on all cylinders and is well-positioned for sustained long-term revenue growth and profitability expansion.
Another reason why Druckenmiller and his team at Duquesne may have sold off PLTR stock, which also concerns me, is the company’s valuation. While PLTR stock didn’t trade at as high a premium during the third quarter as it does now, the company has consistently traded at an elevated valuation, leading analysts to repeatedly issue new warnings.
Thus, a critical question remains: Should you follow Druckenmiller’s lead in selling PLTR, or does the stock have more upside potential moving forward? Let’s find out.
PLTR’s Key Metrics Continue to Improve
On Nov. 5, PLTR stock jumped over 23% after the company posted Q3 results and guidance that topped estimates on all fronts.
Its revenue increased by 30% year-over-year to $725.5 million, beating both its own guidance and even the most bullish analysts’ estimates. Q3 marked the sixth consecutive quarter of accelerating revenue growth, pointing to continuously growing demand for its offerings. A key point is that PLTR’s revenue growth accelerated by 3 percentage points in Q3, up from 27% year-over-year growth in Q2, which had improved from 21% year-over-year growth in Q1. Both the government and commercial businesses showed strong performance, with their revenues climbing 33% and 27%, respectively. The company’s growth in both segments further reinforces its fundamental strength.
Another highlight in Palantir’s report is that U.S. commercial revenue rose 54% year-over-year to $179 million, which reflects strong interest from U.S. businesses in the company’s AI offerings. Notably, PLTR’s Artificial Intelligence Platform (AIP), launched in mid-2023, has quickly become a fundamental component of its growth strategy. With that, the rapid adoption of AIP is fueling revenue growth acceleration as growing demand for the platform leads to new customer acquisitions and expansions of existing deals. In Q3, the company secured 104 deals, each valued at over $1 million, contributing to a 33% year-over-year increase in total contract value (TCV) to $1.1 billion.
In terms of profitability, it’s clear that despite its rapid growth, Palantir continues to expand its margins significantly. Its adjusted EPS stood at $0.10, up 43% year-over-year and topping expectations by $0.01.
Turning to the balance sheet, Palantir ended the quarter with $4.6 billion in cash, cash equivalents, and U.S. Treasury securities, and without any debt, which positions it well for potential M&A deals. This could open up new opportunities for revenue growth and synergies.
Palantir’s Management Becomes Even More Confident
Following a strong Q3 performance, Palantir raised its full-year guidance for key metrics, signaling management’s confidence in the company’s ability to sustain its momentum. The company sees revenue in the range of $2.805 to $2.809 billion, a 26% year-over-year increase at the midpoint. Also, U.S. commercial revenue is projected to surpass $687 million, representing a growth rate of at least 50%. In addition, the company projects adjusted operating income between $1.054 and $1.058 billion and anticipates that adjusted free cash flow will exceed $1 billion.
Meanwhile, management continues to bet on AI, reiterating its commitment to aggressively invest in AIP, given the platform’s effectiveness in helping organizations efficiently deploy AI-driven solutions at scale. This move is expected to improve Palantir’s value proposition, enabling the company to potentially expand deals with existing customers while attracting new ones.
“This is a U.S.-driven AI revolution that has taken full hold. The world will be divided between AI haves and have-nots. At Palantir, we plan to power the winners,” said Palantir CEO and co-founder Alex Karp.
According to Wall Street estimates, PLTR is expected to post a 51.76% year-over-year increase in its adjusted EPS to $0.38 in fiscal 2024, while revenue is projected to grow 25.59% year-over-year to $2.79 billion.
PLTR’s Valuation Remains a Key Concern
The most debated topic regarding Palantir is, of course, its valuation. Following the rapid rally, PLTR now trades at 217.14 times forward adjusted earnings and 67.16 times forward sales, significantly exceeding the sector median levels. With that, investors are essentially split into two cohorts regarding their views on the stock’s valuation.
The first group argues that such a premium is impossible to justify. This viewpoint arises from the fact that consensus estimates predict growth in the mid-twenties range over the coming years. Even if revenues were to quadruple, Palantir would still remain one of the most richly valued stocks in the sector. If we closely examine the quarterly consensus estimates for fiscal 2025, they currently suggest a deceleration in revenue growth for each quarter. But will Palantir’s revenue truly decelerate in the coming quarters? For me personally, it’s too early to conclude. I would prefer to observe how AI tailwinds will influence the company’s growth narrative, which leads us to the second group of opinions.
The second group contends that Palantir will be able to sustain its impressive growth trajectory over an extended period, justifying its current valuation. This view is based on expectations that the company’s AIP will continue to drive aggressive revenue growth. Moreover, PLTR has been significantly increasing its R&D spending in recent quarters. As a result, continued innovation can also help drive its growth. Finally, Palantir’s strong cash position enables it to pursue growth through acquisitions. I also came across an interesting argument noting that Amazon’s average P/E ratio between 2009 and 2019 was 325x. Despite this, Amazon’s aggressive business expansion led to its stock price multiplying several times during that period.
Options Market Sentiment on Palantir Stock
Looking at the option chain for Feb. 21, 2025, the $80.00 CALL option has a bid/ask spread at the time of writing of $11.40/$11.60, while the $80.00 PUT option displays a spread of $8.35/$8.50. Remember that this option strike is nearest to the current stock price. We can now calculate the expected price movement by using the midpoint prices of these options:
8.43 (80.00 put) + 11.50 (80.00 call) = 19.93/82.38 = 24.2%
Using the long straddle strategy and based on current prices, the options market suggests that PLTR stock could move about 24% up or down by the February options expiration from the $80.00 strike price. That would place the stock in a trading range of $62.4 to $102.3.
Notably, at the $80.00 strike price, call options outnumber put options by a ratio of about 2 to 1, with 12,676 open calls compared to 6,867 open puts. This difference suggests that options market traders are optimistic about PLTR stock and expect its price to rise further.
What Do Analysts Expect for PLTR Stock?
Analysts hold a cautiously optimistic view on Palantir stock, which is evident from the consensus “Hold” rating. Among the 17 analysts providing recommendations for the stock, two recommend a “Strong Buy,” eight suggest a “Hold,” two advise a “Moderate Sell,” and five give a “Strong Sell” rating. Notably, the stock trades at nearly double its mean target price of $42.80 and has also surpassed the Street-high price target of $80.00.
The Bottom Line on PLTR Stock
In summary, I don’t believe investors should follow Billionaire Stanley Druckenmiller’s lead and sell the majority of their PLTR stock. The company is fundamentally strong, and the AI momentum continues to be robust. With that, I align with Wall Street’s consensus and assign PLTR stock a “Hold” rating. The following phrase best describes my stance on PLTR stock: “Too good to sell, too pricey to buy.”
