Palantir Technologies Stock Drops Amid Pentagon Budget Cut Concerns
Palantir Technologies’ stock experienced a significant drop of 10% on Wednesday, February 19, 2025, following reports of potential Pentagon budget cuts. The decline came after the Washington Post revealed that Defense Secretary Pete Hegseth had ordered Pentagon and U.S. military leaders to draft plans to reduce the defense budget by 8% annually over the next five years. The proposed cuts, which must be finalized by February 24, could impact Palantir, a major defense contractor that has secured over $1.3 billion in defense contracts since 2009. The stock, which had been up 47% since the start of the year, closed at $112.06, erasing nearly two weeks of gains.
The budget cuts, if implemented, would exempt certain categories such as southern border operations, nuclear weapons, and missile defense but could slash tens of billions of dollars from the Pentagon budget annually until 2030. Palantir, known for its surveillance and defense software, has been a strong performer in the stock market, with shares surging over 358% since February 2024, partly due to its advancements in artificial intelligence. However, the news of potential cuts has raised concerns about the company’s future revenue streams from government contracts.
In a separate development, Palantir CEO Alex Karp announced plans to sell $1.2 billion worth of company stock through a Rule 10b5-1 trading plan. This move comes as Palantir’s stock continues to rally, with a 63% increase year-to-date and a 427% gain over the past 12 months. Karp had previously sold $1.95 billion worth of stock in 2024, partly to cover tax obligations. Despite the stock’s strong performance, analysts remain cautious, with a consensus Hold rating and a price target suggesting a 28.43% downside risk from current levels.
Meanwhile, unusual trading activity in Palantir’s stock options indicates bullish sentiment among investors. A large volume of out-of-the-money put options suggests that some institutional investors are willing to buy shares at lower prices, reflecting confidence in the stock’s long-term potential. Palantir’s accelerating free cash flow growth and operating leverage have contributed to its recent success, confounding analysts who have underestimated its performance.
Palantir Stock Suddenly Falls 10% After Report Of Incoming Pentagon Budget Cuts
Palantir has been awarded over $1 billion in defense contracts since 2009.
www.forbes.com
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