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After a spectacular run in 2024, shares of Palantir (PLTR) have been feeling the heat in recent trading sessions. Investors are worried about the tech stock’s lofty valuation and a challenging macroeconomic environment, ultimately driving PLTR stock down 28% from its all-time high. The selling pressure began on Feb. 19 with a 10% drop and has continued following concerning recent developments.
First, CEO Alex Karp adopted a trading plan allowing for the sale of nearly 10 million shares of Class A common stock through September 2025. Although it is not uncommon for executives to sell shares using prearranged plans, the timing fed into concerns that Palantir is overvalued.
Second, newly appointed Defense Secretary Pete Hegseth has ordered an 8% annual cut in defense spending over the next five years. This could significantly impact Palantir, which derives substantial revenue from government contracts.
According to Yahoo Finance, Palantir’s annual report revealed three additional red flags. For instance, its employee headcount grew just 5% in 2024 after declining 3% in 2023, with only 98 net new hires over two years.
Moreover, the company’s Chief Accounting Officer, Heather Planishek, announced her resignation effective Feb. 24, with CFO David Glazer assuming her duties temporarily. Lastly, Palantir’s top three customers accounted for 17% of its total sales in 2024, making investors wary of its customer concentration.
Despite the ongoing pullback, Palantir stock has increased by 290% in the last 12 months, valuing the company at a market cap of $230 billion. Let’s see if the recent drawdown in share prices provides a buying opportunity right now.
How Did Palantir Perform in 2024?
Palantir Technologies reported revenue of $2.9 billion in 2024, a 29% increase over the previous year. The data analytics company has successfully transformed into a profitable enterprise, posting a net income of $467.9 million for the year.
Its dual-segment strategy continues to deliver balanced growth, with government contracts generating $1.57 billion (up 28%) and its commercial business bringing in $1.3 billion (up 29%). U.S. commercial revenue showed particularly strong momentum, increasing 54% to $702.3 million.
Palantir’s Artificial Intelligence Platform (AIP), launched in 2023, has become a key growth driver. The company reported that its AIP bootcamps, which allow potential customers to experience the platform with their own data in days rather than months, have significantly accelerated the sales cycle.
At year-end, Palantir’s total remaining deal value reached $5.4 billion, a 40% increase over the previous year.
Palantir’s cash flow generation has also been robust. Its operating cash flow was $1.15 billion for the year, while it ended 2024 adjusted free cash flow of $1.25 billion and $5.2 billion in cash.
Is PLTR Stock Still Overvalued?
Palantir indicated it will continue investing in research and development while maintaining profitability. Its management highlighted plans to expand access to its platforms through new delivery models and partnerships. While Palantir is a profitable company growing at a steady pace, the tech stock remains extremely expensive.
According to consensus estimates, Palantir is forecast to increase:
- Sales from $2.9 billion in 2024 to $4.8 billion in 2026
- Adjusted earnings per share from $0.41 in 2024 to $0.70 in 2026
- Free cash flow from $1.14 billion in 2024 to $1.83 billion in 2026
So, priced at 47x forward sales, 128x forward earnings, and 125x forward FCF, PLTR stock trades at a hefty premium. Out of the 19 analysts covering Palantir stock, three recommend “Strong Buy,” 10 recommend “Hold,” one recommends “Moderate Sell,” and five recommend “Strong Sell.” The average trading price for PLTR stock is $85.11, lower than the current price.
