Company Introduction and Overview
Palantir Technologies (PLTR) is arguably the hottest company in the U.S. stock market at the moment.
As an AI software company, it has avoided the tariff issues that are shaking the market these days, and Peter Thiel, CEO of Palantir, is considered a representative pro-Trump businessman along with Elon Musk and Steve Schwarzman.
Since it mainly deals with data from government agencies, it is also consistent with the U.S. government's efficiency improvement project (DOGE), represented by Elon Musk. As if to prove this, Palantir's stock price has surged a whopping six times over the past year.
Source : investing.com
Palantir's stock fell sharply after announcing its first quarter results. Let's check the recent performance and reasons for the stock price decline to see what background caused the sharp decline.
2025 Q1 Performance Summary
Item PerformanceMarket ExpectationsYoYSales$884M$862.9M+39%EPS (Non-GAAP)$0.13$0.13MatchUS Commercial Sales$255M-+71%US Government Sales$373M-+45%
- Annual guidance was raised to $3.89B to $3.902B based on sales, and operating profit was also raised.
- The sum of sales growth rate and operating profit ratio reached 83, more than double the 40 standard for high-growth software companies.
Background to plummeting stock price
Before this earnings announcement, Palantir had recorded a large rally, rising by more than 70% compared to the beginning of the year and recovering to its previous high point. However, after the earnings announcement, the stock price plummeted by nearly 8-9% and underwent correction. The background to this decline is as follows.
1. Excessively high expectations and valuation burden
- Although the performance itself was good, the stock price had risen excessively on the premise of ‘perfect performance’, so even a small disappointment could cause a large adjustment.
- Just before the announcement, the PER based on market capitalization was more than 600 times, and the forward PER also reached 200 times, which was evaluated as excessive based on traditional valuation standards.
- Some investors and institutions are taking profits, and it is analyzed that signals of technical overheating also played a role.
2. Concerns about government budget cuts
- The recent move by the U.S. government to cut contract budgets has stimulated anxiety about Palantir, which is highly dependent on the defense industry, but in reality, Palantir-related contracts have not been canceled.
- Rather, a structure is being formed in which fruitless contracts are being liquidated and only companies that can prove actual performance survive, which could serve as a favorable environment for Palantir.
3. High point formation from a technical analysis perspective
- Some technical analysts say the stock price is forming a double top pattern and are warning of a future correction to $87 or $80.
- In particular, if it falls below the 10-day moving average, a short-term adjustment may begin in earnest, and a decline of 20-30% from the high point cannot be ruled out.
Investment points and risk factors
Investment Point Risk Factor - US commercial sector sales growth of 71%
- Government sector also grew by 45%
- Accelerating transition to AIP-based autonomous operating system - PER above 400, excessively high valuation
- Profit-taking listing after excessive technical rally
- Lack of demand from institutional investors (retail-oriented flow)
Conclusion and Outlook
Palantir's earnings announcement was worthy of positive evaluation, both in terms of numerical performance and comments from management. U.S. commercial sales have surged, the AIP-centered strategy shift is taking shape, and the company has proven its defense capabilities by being excluded from government contract cancellations.
Overall, the results of the earnings call were flawless.
However, as we always say, a PER of 650 means that anything can happen.
A PER over 600 can be seen as excessively reflecting expectations about Trump's election and the DOGE project. In other words, this sharp decline appears to be the resolution of the Palantir + Trump synergy due to the recent decline in the investment attractiveness of the United States and the decline in trust in Trump's policies.
I don't want to say that valuations will normalize after repeated sharp declines. Palantir was overvalued even six months ago and a year ago. In addition, as stated in the previous article, Palantir's PER is a little stronger than that of other companies.
However, at least at this point, you should leave Palantir's adjustment wide open and wait for the bottom, and those who have a large investment in Palantir need to consider reducing their proportion.
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