Palantir Plunges Amid Negative News: Unwinding of 2023's Popular Trade
Shares of Palantir (PLTR) experienced a significant decline this week, marking the beginning of a potential unwinding of the market's favored trade from 2025.
Key Factors Contributing to the Sell-Off:
* CEO's Trading Plan: Co-founder and CEO Alex Karp's implementation of a 10b5-1 trading plan, enabling the sale of up to 9.975 million shares, raised concerns about his perception of the stock's valuation.
* Defense Spending Cut: Incoming Defense Secretary Pete Hegseth's announcement of an 8% annual reduction in defense spending for the next five years threatens Palantir's reliance on government contracts.
* Cautionary Signals from Annual Report:
* Slow headcount growth of only 5% in 2024, following a 3% decline in 2023.
* Departure of Chief Accounting Officer Heather Planishek.
* Continued reliance on a limited number of top customers.
Despite previous strong performance, including a 52% surge in fourth-quarter US revenue, the recent news flow has raised red flags and dampened the bullish sentiment that dominated earlier this year. Wall Street analysts have made upward revisions to EPS expectations for 2025 and 2026, but it remains uncertain whether these projections can withstand the current challenges facing Palantir.