And then Doge came to town.
On Feb. 3 Palantir (PLTR) shares soared 23% to a record as the big-data-analytics company posted a very big fiscal-fourth-quarter earnings report.
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The Denver software company also issued upbeat guidance for the current quarter and full year. What’s not to love?
“The business we have built has now developed its own internal momentum and strength, its own interior life and forms of untamed organic growth, with the output that we are seeing far surpassing what we are investing,” Co-Founder and Chief Executive Alex Karp said in his letter to shareholders.
“A software juggernaut has indeed emerged,” he declared.
Alex Karp, CEO of Palantir, plans to sell $1 billion of company stock. Photo: David Paul Morris/Bloomberg via Getty Images
Investors and the CEO are selling Palantir stock
But then the air was filled with the relentless snarls of chainsaws, as Tesla (TSLA) CEO Elon Musk and the Department of Government Efficiency buzzed into Washington with plans to drastically reduce federal spending — including at the Department of Defense.
A hefty chunk of Palantir’s revenue, around 50% to 60%, comes from government contracts, with most of this business stemming from the U.S. government, particularly the Pentagon.
Defense Secretary Pete Hegseth reportedly directed the DoD to come up with plans to cut 8% from the defense budget in each of the next five years. That proposal chopped into Palantir’s stock.
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In addition to the Doge threat, Palantir’s shares got hammered following reports that Karp planned to sell $1 billion of the company’s stock.
The shares tumbled from a three-year high of $125 a share on Feb 18 to $81.84 at last check.
“Palantir taking a hit after everyone finally realized no one knows what the f@ck this company does,” one person said in a Feb. 19 X post.
That might be a little harsh, but many of Palantir’s investors thought it was a good time to get out of Doge and they promptly dumped their shares.
Analyst cites double whammy
“It was a double whammy,” Morningstar equity analyst Mark Giarelli said. “This likely spooked investors because 40% of Palantir’s revenue comes from US government contracts, and no one likes to see the CEO sell off shares.”
Giarelli said Palantir holds the potential for continued strong growth, but he warned that the stock’s trajectory is subject to wide swings as investors continually assess the total addressable market for Palantir’s analytical software products.
Related: Analyst who forecast Palantir rally updates stock price target
A team of Wedbush analysts headed by Dan Ives is looking beyond the red ink.
“As Palantir has heavy exposure to US government spending/budgets, there have been recent [Wall Street] concerns that this spending backdrop will be a headwind to this tech stalwart’s growth profile in 2025 and beyond,” the investment firm said in a March 4 note to investors.
“However, to the contrary,” Wedbusih wrote, “based on our conversations there is a growing view in the 202 area code [in Washington] that the efficiency focus of the Doge initiatives could be a major coup for the likes of Palantir over the next year as its unique software value proposition plays perfectly into this broader Beltway theme under Trump and Musk.”
The firm, which maintained its outperform rating and $120 price target, said “Palantir is so well positioned for this new disciplined spending environment at the Pentagon.”
“This will ultimately be a positive growth catalyst as the various programs are scrutinized and as Karp & Co. get a bigger seat at the table in the Beltway,” Wedbush said.
“We also believe Palantir is attached to many programs/contracts in the DoD that are safe and not at risk of getting cut in this new spending climate given their high priority,” the firm added.
Related: Veteran fund manager unveils eye-popping S&P 500 forecast
