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Palantir (PLTR-10.66%) (PLRTR) extended its decline on Monday morning following last week’s plunge that was driven by a new share sales initiative by the CEO and a media report of potential U.S. defense budget cuts. The stock is now about 30% down from its 2025 peak earlier this month.
Defense-spending cuts could weigh heavily on Palantir, which reported a 45% increase in revenue from the U.S. government in the fourth quarter. Overall revenue was $828 million — a 36% jump year over year and a 14% increase from the previous quarter.
Even after the recent selloff, the stock is still up almost 300% over 12 months and trading at about 490 for its historic earnings and about 190 for its projected future earnings. By comparison, companies in the Nasdaq Composite Index are trading at an average price-to-earnings ratio of just under 42, more than a third higher than the historical average for the index.
“Revenues and net income have been increasing quarter after quarter — but not by the rate at which its stock is growing,” Michael Rechenthin, head of R&D at Tastylive, a streaming platform geared toward options traders, said earlier this month, before the selloff.
Palantir’s U.S. government business had a pronounced revenue deceleration in 2021 and 2022. “There is high risk of this happening again,” which would probably result in a valuation multiple contraction, according to William Blair analysts cited by Barron’s.
Even without major bad news, the stock had been trading at extraordinary levels, and the rally was set to peter out as investors got exhausted, Explosive Options founder Bob Lang said before the stock plunge. “The stock’s not made of Teflon,” he said earlier in February.