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Palantir (PLTR) has undoubtedly been a shining star of the artificial intelligence (AI) boom, delivering jaw-dropping returns of nearly 955% over the past two years. From powering military operations and supply chains to fighting fraud and enhancing healthcare, Palantir’s AI software has become a game-changer, with strategic deals inked with tech titans like Amazon (AMZN), Meta (META), and Microsoft (MSFT). But after an epic rally, the tech darling’s meteoric rise has finally hit turbulence. Two storm clouds have rolled in this month, rattling investors' confidence.
The first is CEO Alex Karp’s newly filed Rule 10b5-1 trading plan, which outlines his intention to sell nearly 10 million shares. Such a move, especially following a massive rally, can signal caution. The second blow comes from Defense Secretary Peter Hegseth’s proposal to slash the U.S. defense budget by 8% over five years, threatening a vital revenue stream for Palantir. The company built its name on providing advanced software to defense and intelligence agencies before expanding into enterprise data and AI solutions, and reduced government spending could directly hit its financials.
Plus, with Jefferies analysts’ recent projections indicating a further 31% downside potential from current levels, here’s a closer look at why Palantir’s red-hot rally could be cooling off this year.
About Palantir Stock
Founded in 2003, Denver-based Palantir Technologies (PLTR) has evolved into a tech titan, trusted by governments, militaries, and global enterprises for its powerful intelligence analysis and operational planning solutions. At the heart of its recent success is the Artificial Intelligence Platform (AIP), a game-changing platform that seamlessly integrates generative AI into business operations, revolutionizing how organizations make data-driven decisions and boosting efficiency and innovation across industries.
With a market cap of approximately $203.5 billion, PLTR has recently hit a speed bump, shedding 32% since peaking at a 52-week high of $125.41 on Feb. 19. Yet, even after factoring in this steep pullback, PLTR is up a staggering 245% over the past year, crushing the broader S&P 500 Index’s ($SPX) 15.4% return during the same stretch.
As Palantir remains a high-flier even after its recent steep pullback, its impressive run comes with a hefty price tag. The stock commands an eye-popping 281.34 times forward earnings and 69.83 times sales, far exceeding both its sector median and its own five-year historical averages. While such lofty valuations can be alarming, they also underscore the market’s big bet on Palantir’s future growth, signaling strong investor confidence that the AI powerhouse will continue to push boundaries and drive innovation across industries.
Palantir Beats on Q4 Earnings
Palantir kicked off February on a strong note, delivering a knockout Q4 earnings report that sent its stock skyrocketing over 23% on Feb. 4. The AI software provider reported an impressive 36% year-over-year revenue jump to $828 million, outpacing analyst expectations by about 6.7%. Even more impressive was its adjusted EPS, which surged a remarkable 75% annually to $0.14, delivering a substantial 23.7% beat against Wall Street estimates.
The company’s impressive performance was driven by a 52% year-over-year increase in U.S. revenue, reaching $558 million. U.S. commercial revenue exploded by 64% annually to $214 million, while its government segment kept pace with a robust 45% jump to $343 million. Palantir flexed its deal-making muscle by closing 129 contracts worth at least $1 million, 58 deals over $5 million, and 32 surpassing $10 million.
Palantir also showcased its growth prowess with a 43% year-over-year surge in its customer base, reflecting booming demand for its AI-powered data solutions. During the final quarter of 2024, the company raked in a solid $460 million in cash from operations, achieving a remarkable 56% margin, while its adjusted free cash flow skyrocketed to $517 million, boasting a stellar 63% margin.
With a rock-solid balance sheet holding $5.2 billion in cash, cash equivalents, and short-term U.S. Treasury securities, Palantir remains well-equipped to drive innovation, seize new opportunities, and weather market volatility. Looking forward to 2025, management anticipates revenue to range between $3.741 billion and $3.757 billion, while U.S. commercial revenue is expected to be over $1.079 billion, representing a growth rate of at least 54%.
Profitability is a key focus for the current fiscal year, with adjusted operating income forecast between $1.551 billion and $1.567 billion. Impressively, Palantir also expects to achieve GAAP operating income and net income every quarter this year, showcasing its solid financial momentum.
What Do Analysts Expect for Palantir Stock?
While investors reacted positively to the Q4 earnings release, on Feb. 19, Jefferies analyst Brent Thill spotlighted several red flags in Palantir’s annual report. He raised eyebrows over the company’s sluggish 5% headcount growth and its uneven performance, with U.S. revenue surging 38% year-over-year in fiscal 2024 while international sales flatlined. Thill also highlighted potential warning signs as CEO Alex Karp and President Stephen Cohen initiated new Rule 10b5-1 trading plans, which allow the sale of nearly 14 million shares until Sept.12, 2025.
The concerns didn’t stop there. The departure of Chief Accounting Officer Heather Planishek this February and a sharp 40% year-over-year drop in SPAC-related revenue to $52 million in fiscal 2024 further clouded Palantir’s outlook. Thus, with all these factors in mind, Thill reaffirmed an “Underperform” rating and a $60 price target on Palantir, which now indicates about 30% downside potential from current price levels.
Overall, Wall Street appears skeptical about PLTR stock, maintaining a consensus rating of “Hold.” Of the 19 analysts offering recommendations, three advise a “Strong Buy,” 10 suggest a “Hold,” one gives a “Moderate Sell,” and the remaining five maintain a “Strong Sell.” While the stock is trading just below its average analyst price target of $85.11, the Street-high target of $141 signals that PLTR can still climb as much as 65% from current levels.
