Palantir Technologies (NASDAQ:PLTR | PLTR Price Prediction) has been one of the most richly-valued stocks in the stock market. The stock delivered explosive returns in the past year and some believed it was on course to be a $1 trillion company, given that fundamentals were out the window.
However, it seems that the market is starting to make more sense as the stock fell significantly on Pentagon budget cut news. And while many thought that PLTR would pick back up like Nvidia (NASDAQ:NVDA) did after the DeepSeek spook, this did not happen. Instead, Palantir has been sliding down and has lost more than 25% of its value in the past week.
24/7 Wall St. Key Points:
- PLTR stock has been tumbling in the past week.
- It is now down over 25%.
- Why? Let’s take a look. In the meantime, grab our free “The Next NVIDIA” report. It includes a software stock with 10X potential.
What Happened?
The biggest bearish catalyst was the U.S. Defense Secretary Pete Hegseth announcing plans for an 8% reduction in defense budgets over the next five years. The ceasefire in the Middle East has been holding for a surprisingly long amount of time and peace talks with Russia have also been advancing rather quickly and in a much more serious way than before.
Alex Karp has a trading plan that will allow $1.2 billion in shares to be sold by September 2025, which could also push down prices.
On top of that, there has been a round of firings of top staff at the Department of Defense. So, many are starting to think that the defense budget cut could indeed materialize. This would harm Palantir significantly, as its government contracts constitute 40% of the company’s revenue.
The general sentiment around AI stocks has also cooled off greatly, especially after Microsoft (NASDAQ:MSFT) canceled data center leases in the U.S. Palantir is considered an AI stock, so the spillover effects have pushed down the stock more.
What This Means for PLTR Stock
This may mean that the honeymoon period for Palantir is over. The stock trades at an excessively high valuation at 182 times forward earnings and 62 times sales even after the 25% decline.
The consensus price target of $73.2 implies 21% more downside risk from here. The highest price target is at $141 as many think that the recent correction is temporary and further quarterly beats could re-ignite optimism, but for now, Wall Street is reassessing the price they’re willing to pay for PLTR stock.
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