Analysts revisit Palantir stock ratings amid $90 billion slump

Palantir shares have lost more than $90 billion in value since their Feb. 18 peak.

Mar 5, 2025 - 13:08

Analysts revisit Palantir stock ratings amid $90 billion slump

Palantir Technologies shares moved higher in early Wednesday trading, but have fallen sharply over the past month, as analysts look to the impact of insider selling from top executives and planned government spending cuts on the data analytics group.

Palantir (PLTR) shares, a standout market performer that has gained more than 910% over the past two years, have levelled-off notably since peaking in mid-February amid concerns tied to pullback in government spending and emergence of China's cut-priced DeepSeek AI chatbot.

Company executives, including CEO Alex Karp, are also looking to cash in on the stock's meteoric rise, noted in the group's recent annual report as well as 10b5-1 plan filings to the Securities and Exchange Commission.

Karp, in fact, is planning to offload another $45 million in Palantir shares his year, having sold around 21% of his stake over the past six months.

Jefferies analyst Brent Thill, who maintained his 'underperform' rating on Palantir stock in a note published Wednesday, said the recent share sales aren't his only concerns.

Palantir shares have lost more than $90 billion in value since their Feb. 18 peak.

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"After peaking at 61x (2026) revenue, Palantir's multiple has quickly compressed by 36% to 39x but is still around two times higher than the next-highest software name," Thill said. "Given how other big multiple stories have traded post-peak, we think there is more multiple contraction to come."

DOGE cuts in focus

Investors have also been spooked by comments from Defense Secretary Peter Hegseth, who has vowed to take around 8%, or $290 billion, out of the Pentagon budget over the next five years, a move that could affect one of Palantir's crucial revenue sources.

The U.S. Department of Defense for around 17% of Palantir's overall revenue in 2024, and around 18% in 2023, according to its annual report.

Wedbush analyst Dan Ives, however, feels Palantir could actually gain from the DOGE-lead focus on government cost-cutting given its "unique software value proposition."

Palantir uses its artificial-intelligence platform, known as AIP, to help clients pull together disparate collections of data into a single model that they then can build, train and deploy in their day-to-day processes.

The group also benefits from its ontology offering, a framework that helps represent and connect real-world entities, data and processes for its government and commercial clients.

Palantir may boost government efficiency

"Palantir is in the sweet spot to benefit from a tidal wave of federal spending on AI while other non-strategic areas of the federal IT budget get scrutinzied/cut," Ives said in a note published earlier this week.

"The company has received FedRAMP high [the highest level of security in the government's authorization management program] for its entire cloud services, allowing it sell products across the entire US government including, the most sensitive workloads in its cloud offerings," Ives 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," he added.

William Blair analyst Louie DiPalma also struck a more upbeat tone, and lifted his rating on the stock to 'outperform' in a note published Wednesday, but warned that a government shutdown on March 15 could trigger "further downside pressure."

"While valuation is still frothy with potential downside risk of greater than 40% on government contract delays, there have been positive developments,' DiPalma said.

"If the market reverts to risk-on mode, the stock price may return to its prior peak, but we expect shares to be range-bound over the next year with continued elevated volatility given the puts and takes," he added.

Bullish outlook

Palantir posted stronger-than-expected fourth quarter earnings of 14 cents per shares earlier this month, with revenues rising 36% from the year-earlier period to $827.5 million, thanks in part to a surge in demand for AI-related products offered by its commercial business.

Palantir forecast 2025 revenue in the region of $3.75 billion, firmly ahead of the LSEG estimate. Commercial revenue is likely to rise 54% from 2024 to $1.08 billion.

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Palantir forecast 2025 revenue in the region of $3.75 billion, firmly ahead of the LSEG estimate, with commercial sales likely to rise 54% to $1.08 billion. The group also estimated adjusted operating income for the three months ending in March at $356 million on revenues of $860 million.

Palantir shares were marked 3.02% higher in premarket trading to indicate an opening bell price of $86.95 each.