Palantir stock fell early Thursday on news that CEO Alex Karp plans to sell more than $1 billion worth of his shares and that the Pentagon is considering budget cuts over the next five years.
Palantir shares shed more than 2% to 109.26 in premarket trades, even as a prominent analyst argued that the cuts could actually boost the software powerhouse. The stock plunged 10% to close at 112.06 on Wednesday.
Palantir disclosed that Karp's new trading plan provides for a sale of up to 48.9 million shares, which could be worth up to $1.23 billion, according to Barron's. Palantir reported the change in a Tuesday filing with the Securities and Exchange Commission.
In another development, Defense Secretary Pete Hegseth reportedly wants senior Pentagon leaders and other top military officials to come up with a plan to cut the defense budget over the next five years, according to the Washington Post.
Will DOD Cuts Actually Boost Palantir Stock?
But Wedbush analyst Dan Ives downplayed worries about the cuts' impact on Palantir, saying, "The bears that have hated Palantir from $12 to $120 in the last 18 months now have found their latest 'silver bullet' negative thesis around PLTR being exposed to these budget cuts." But the cuts will likely have the opposite effect, he argued.
"Palantir's unique software approach will enable the company to gain MORE IT budget dollars at the Pentagon....not less despite these initial knee jerk reactions from the Street," he said in a client note.
"Palantir is so well positioned for this new disciplined spending environment at the Pentagon and this will ultimately be a positive growth catalyst as the various programs are scrutinized and as Karp & Co. get a bigger seat at the table in the Beltway," Ives wrote.
Palantir's stock plunge ended a four-day winning streak. It also underscored the data analytics company's reliance on government and defense spending.
Palantir stock holds a near perfect Relative Strength Rating of 99, and has rallied more than 45% year to date.
