Palantir Sell-Off Makes Stock Cheap

Most people who are selling Palantir Technologies Inc. (NASDAQ: PLTR) stock, which is down 24% in the past week, have dumped their shares on one of two false premises. The first is that it matters that CEO Alex Karp is selling shares. The other is that the Trump administration will sharply cut the defense budget.

Karp’s stock sale plan is a tool senior management at public companies sometimes use. It allows them to sell shares even if they have non-public information. Karp is using a rule 10b5-1 plan. A brokerage firm runs the plan, and shares are sold at set price limits. At companies where inside information is a regular part of doing business, it may be the only way an executive can sell shares without accusations that the sales are self-serving. It can be used to sell vested shares, restricted stock, and options. It need not have anything to do with Karp’s view of Palantir’s future.

Second, the idea that Defense Secretary Pete Hegseth can cut the Department of Defense is false. The proposal to make an 8% cut over each of the next five years is nothing more than a suggestion. These cuts may also “realign” the spending of defense dollars. Beyond that, congressional bills and the national budget would set any cuts. And a decision by Congress is a long way off. Any reaction to Hegseth’s statement does not take these hurdles seriously.

Palantir’s Fortunes

There is a reason for the sharp rally in Palantir’s stock over the past year. In the most recently reported quarter, revenue rose 36% to $828 billion. Management guided revenue for the full year at $3.741 to $3.757 billion. That was above most analyst forecasts.

If there had been any substantial change in Palantir’s fortunes, the sell-off might make sense. However, that has not happened.

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