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U.S. defense stocks opened in the red on Thursday, Feb. 20 following reports that President Donald Trump’s administration has ordered the Pentagon to lower its budget by 8% annually over the next five years.
The offsets totaling around $50 billion “will then be spent on programs aligned with President Trump’s priorities,” according to Robert Salesses, the U.S. Deputy Secretary of Defense.
A prominent name that’s taking a big hit on the defense budget cut news is Palantir Technologies (PLTR), which Dan Ives, a senior Wedbush Securities analyst, dubbed a buying opportunity for long-term investors in a research note today.
Wedbush Dubs DoD News a Positive for Palantir Stock
Ives remains bullish on Palantir stock as the DoD cuts “will enable the company to gain more IT budget dollars at the Pentagon, not less.”
That’s because under Trump, the U.S. government wants to cut defense spending on lower-priority initiatives to focus more on “mission critical” programs, which may include AI-enabled solutions.
PLTR could therefore benefit as it’s committed to bringing artificial intelligence to government agencies. Wedbush reiterated its “Buy” rating on Palantir today. Its $120 price target indicates potential upside of about 20% from current levels.
Despite a 10% decline on Thursday, Palantir stock is up more than 30% in the year to date.
PLTR Offered Promising Guidance for 2025
Palantir stock may be worth owning on today’s weakness because it’s growing at a rapid pace.
The company based out of Denver, Colorado, earned 14 cents a share on $828 million in revenue in its fourth financial quarter. Analysts, in comparison, were at 11 cents per share and $775 million, respectively.
On Feb. 3, the Nasdaq-listed firm offered impressive guidance for the full year as well. Palantir expects at least $3.74 billion of sales in 2025 – significantly better than the consensus estimates of $3.52 billion.
Valuation Remains a Concern for Palantir Shares
Investors should know, however, that Wedbush Securities has somewhat of a contrarian view on Palantir shares.
Valuation remains a concern for PLTR stock, which is why the consensus rating on it currently sits at “Hold” only. Its mean price target of about $82 warns of another 17% downside from here.
