TLDR
- Palantir CEO Alex Karp plans to sell up to $1 billion in shares (approximately 10 million shares)
- Palantir stock has seen massive growth, rising up to 625% since the start of 2024 before recently dropping 27-30% from its peak
- Multiple Palantir executives, including Karp, sold substantial amounts of stock in 2024, totaling over $2.6 billion
- The stock is trading at high multiples: 91 times sales and 192-220 times forward earnings
- Reports indicate the Pentagon may reduce defense spending by 8% annually over five years, potentially affecting Palantir as 42% of its revenue comes from U.S. government customers
Palantir Technologies has experienced a sharp pullback after an extraordinary rally, with shares dropping approximately 30% from their February peak of $125. The decline follows news that CEO Alex Karp plans to sell up to $1 billion worth of stock, alongside reports of potential Pentagon budget cuts that could impact the data analytics company.
The high-flying tech stock had been on an incredible run since January 2024, climbing as much as 625% before the recent pullback. This remarkable performance made Palantir the best-performing member of the S&P 500 in 2024, when it advanced 340% amid strong financial results driven by demand for its artificial intelligence platform.
However, investor sentiment has turned cautious following a February 18 Form 10-K filing revealing that Karp had updated his trading plan to allow for the sale of approximately 10 million shares through September 12, 2025. President Stephen Cohen also signed a trading plan permitting the sale of 4 million shares through the same date.
These trading arrangements, known as 10b5-1 plans, protect executives from accusations of illegal insider trading by establishing predetermined conditions for stock sales. While such plans are common practice, the timing and scale of potential sales have raised eyebrows among investors.
The upcoming sales follow substantial stock liquidations by Palantir executives in 2024. Karp sold 40.7 million shares at an average price of $47.99, generating approximately $2 billion. Other executives also cashed in: CTO Shyam Sankar sold 6.6 million shares for $410.7 million, President Stephen Cohen sold 3 million shares for $152 million, Chief Revenue Officer Ryan Taylor sold 1.5 million shares for $50.6 million, and CFO David Glazer sold 1.2 million shares for $55.8 million.
Despite these sales, it’s worth noting that Karp’s planned divestiture represents only about 10% of his total holdings in Palantir, based on the company’s 2024 proxy filing. This context suggests the CEO maintains substantial faith in the company’s future, though investors remain wary of the selling pressure these transactions might create.
Adding to market concerns, recent reports from The Washington Post and Bloomberg indicate that Defense Secretary Pete Hegseth has asked Pentagon officials to propose ways to reduce the defense budget by 8% annually over the next five years. This development has heightened uncertainty for Palantir, which reported $1.2 billion in revenue from U.S. government customers in 2024, representing approximately 42% of its total revenue.
The company maintains contracts with several Defense Department agencies, including the Air Force, Army, Navy, and Special Operations Command. While the details of potential budget cuts remain unclear, the mere possibility has contributed to the stock’s recent decline.
Not all analysts view the Pentagon’s cost-cutting measures negatively for Palantir. Dan Ives at Wedbush Securities believes the focus on efficiency might actually direct “more IT budget dollars at the Pentagon, not less” toward Palantir’s offerings. Nevertheless, the market has responded cautiously to these developments.
Valuation concerns have also intensified amid the recent pullback. The stock currently trades at approximately 91 times sales and between 192 and 220 times forward earnings. These multiples far exceed those of other high-growth tech companies, including Nvidia, which never traded higher than 51 times forward earnings and 46 times sales during its recent run, despite posting multiple quarters of revenue tripling.
Stock looking expensive at current levels
By comparison, Palantir’s latest quarter saw revenue rise 36%. While this growth is accelerating, some analysts question whether it justifies the company’s current valuation. Wall Street estimates Palantir’s adjusted earnings will increase 35% in 2025, which still leaves the stock looking expensive at current levels.
Despite the recent pullback, analysts maintain a median target price of $97 per share, suggesting modest upside potential from the current trading level of around $90. However, the combination of insider selling, potential government spending cuts, and valuation concerns continues to cast a shadow over the stock’s near-term prospects.
Palantir stock has fallen from its February peak of approximately $125 to around $90 per share as CEO Alex Karp plans to sell up to $1 billion in shares amid concerns about Pentagon budget cuts that could affect the company’s government contracts.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
