Why Palantir Stock Price Suddenly Crash 13% Today?

The Palantir Technologies stock (PLTR) value took a significant hit on Wednesday, dropping 12.9% within just a few hours. Interestingly, the Palantir stock price opened at $123.86 but declined to a low of $108.56 before recovering significantly to $112.06. However, this drop was not unexpected; a series of events brought this outcome. Let’s discuss.

Reasons Behind the Palantir Stock Price Crash Today

A Washington post is one of the most significant reasons behind the Palantir stock price drop. The report mentioned Defense Secretary Pete Hegseth’s new guidelines for an 8% annual reduction in the Pentagon’s budget over the next five years.

This reduction will significantly affect military contractors like Palantir, which generates significant revenue from U.S. government contracts. Interestingly, Palantir’s 2024 annual report discloses that its top three government clients account for 17% of its total revenue.

More importantly, these clients are under the Department of Defense, so this budget cut would significantly impact their revenue. As a result, investors feared the cut, inducing selling pressure on the PLTR stock, which caused a 13% price drop.

However, that is not all. Palantir Technologies CEO Alex Karp also had news that affected the stock price. Karp recently adopted a new stock trading plan, which allows him to sell 10 million shares in the next eight months, disturbing investors’ confidence.

Although the previous plan had even bigger sales, the revelation of this new plan around the budget cut exaggerated the market’s reaction.

Is Palantir Stock Valuation Headed Towards Doom?

The PLTR exponential price rally in 2024 brought everyone’s attention to this stock. Over the past year, the Palantir stock price has surged nearly 380%, but concerns about its sky-high valuation have increased.

The Company’s P/E (price-to-earnings) ratio is 594.20, which shows investors’ aggressive growth expectations. However, a few stock analysts anticipate a slow to 22% year-over-year growth over the next two years, much less than the holders’ expectations. At the same time, some analysts claim that the PLTR stock is overvalued and the Pentagon’s budget cut brings its actual worth out.

Despite these claims, Palantir stock is among the top-performing stocks in the AI sector. Although Jefferies’ Brent Thill maintains its underperforming rating, some believe it could benefit from government AI investments and cost-cutting initiatives.

What’s Next: Is This a Buying Opportunity?

Financial market experts have often regarded the downtrend as a buying opportunity. However, this is not always true. The Palantir’s historical price performance and demand make it a considerable opportunity for investors.

Analysts’ opinions are the same after considering its growth in the commercial AI business. However, investors should still monitor the stock price performance regarding government spending and changes, as PLTR stock price show signs of volatility.