To The Moon

As an investor closely following $Palantir Technologies Inc.(PLTR)$, I’ve been both fascinated and concerned by the recent volatility in its stock price. On February 19, 2025, PLTR plunged as much as 12.5%, closing the day down 10% at $112.06 per share. This sharp decline was triggered by two major headlines: CEO Alex Karp’s plan to sell $1.1 billion worth of shares and the Pentagon’s proposal to cut defense spending by 8% annually over the next five years.

In this article, I’ll share my perspective on whether this drop is unstoppable and whether PLTR could crash below $100. I’ll also explore the broader implications of these developments for the company’s future.

The Double Whammy

First, let’s break down the two key factors driving the sell-off.

1. CEO Alex Karp’s Share Sale Plan

Karp’s decision to sell nearly 10 million shares over the next six months has understandably rattled investors. While it’s worth noting that his previous plan allowed him to sell even more shares, the timing of this announcement couldn’t have been worse. It coincided with news of potential defense budget cuts, amplifying the negative sentiment.

From my perspective, insider sales are always a red flag, especially when they involve such a significant amount. However, it’s also important to consider that Karp has been a long-term advocate for Palantir’s mission. His decision to sell could be driven by personal financial planning rather than a lack of confidence in the company’s future. Still, the optics are undeniably bad, and the market has reacted accordingly.

2. Pentagon Budget Cuts

Palantir derives roughly half of its revenue from government contracts, particularly with the Department of Defense. The proposed 8% annual cuts to the defense budget over the next five years could directly impact the company’s revenue streams.

Defense Secretary Pete Hegseth at the Pentagon in Washington, DC, on February 7.

While some spending categories, like border security and missile defense, are reportedly off-limits, the uncertainty surrounding which contracts will be affected has spooked investors. In my view, this is a legitimate concern. However, it’s worth noting that Palantir’s AI-driven platforms, like Gotham, are deeply embedded in military operations. This could provide some insulation against drastic cuts.

My Analysis

The big question on everyone’s mind is whether PLTR’s decline will continue, potentially pushing the stock below $100. Here’s my take:

1. Valuation Concerns

Palantir’s valuation has been a point of contention for months. With a price-to-earnings (P/E) ratio of nearly 600, the stock is undeniably expensive. Even after the recent drop, PLTR trades at a significant premium compared to its peers. This makes it vulnerable to further declines if investor sentiment sours.

Total Revenue

That said, Palantir’s growth story is compelling. The company has consistently delivered strong revenue growth, with Q4 2024 revenue reaching $828 million, up 30% year-over-year. If it can maintain this momentum, the high valuation might be justified in the long run.

2. Market Sentiment and Technical Factors

The broader market’s reaction to these developments has been harsh, but not entirely surprising. PLTR’s stock had risen nearly 50% year-to-date before the sell-off, making it ripe for profit-taking.

From a technical perspective, the stock has the potential to break below psychological level at 100. I think if institutional investors step in to buy the dip, we might see a stabilization or even a rebound at above 90.

In a strong bull trend, gaps generally do not get filled. I personally do not see the gap being filled as a gap fill would indicate a change of trend, and PLTR might be stuck in a range for several months to come, or even turn bearish. If that happens, I will be looking for an exit instead of an entry.

3. Long-Term Fundamentals

Despite the near-term headwinds, I remain cautiously optimistic about Palantir’s long-term prospects. The company’s AI-driven platforms, like Gotham and Foundry, are industry-leading and have a wide moat. Additionally, its growing commercial segment provides diversification away from government contracts.

Moreover, the AI boom is still in its early stages, and Palantir is well-positioned to capitalize on this trend. While competition from companies like $Microsoft(MSFT)$ is a concern, Palantir’s specialized expertise in defense and intelligence gives it a unique edge.

While the possibility of PLTR dropping below $100 can’t be ruled out, I don’t believe it’s inevitable. The stock’s recent decline is largely driven by short-term factors, and its long-term growth potential remains intact.

That said, investors should brace for continued volatility. The combination of high valuation, insider selling, and potential budget cuts creates a challenging environment for the stock. In my view, the key to navigating this uncertainty is to focus on Palantir’s execution and ability to adapt to changing circumstances.

Final Thoughts

As an investor, I see the recent sell-off as a reminder of the risks associated with high-growth, high-valuation stocks like PLTR. While the company’s long-term potential is undeniable, the near-term challenges are significant.

For those considering buying the dip, I’d advise caution. Wait for clearer signs of stabilization before adding to your position. And for long-term holders, this might be a good time to reassess your investment thesis and ensure it aligns with your risk tolerance.

In conclusion, while PLTR’s drop is concerning, it’s not necessarily unstoppable. The company’s ability to navigate these headwinds will determine whether it can regain its upward trajectory—or whether it will continue to slide toward $100.

@MillionaireTiger @Tiger_comments @Daily_Discussion @CaptainTiger @TigerSG @TigerEvents

Disclosure: This analysis is for informational purposes only and does not constitute investment advice. Conduct your own due diligence or consult a financial advisor before investing.