Palantir Technologies, chaired by Peter Thiel, has recently experienced a significant drop in its stock value. The company's shares retreated more than 13% on Thursday, extending a prior session's nearly 19% slide. The decline follows the announcement that CEO Alex Karp can sell up to 10 million shares over the next six months. Additionally, comments by Defense Secretary Pete Hegseth on potential defense budget cuts have fueled investor concerns.
Karp, known for his eccentric persona akin to Tesla's Elon Musk, has been at the helm of Palantir amid its rise as a retail investor favorite. Despite a forward price-to-earnings ratio of 194—vastly surpassing the S&P 500's average of 22—loyal retail investors have kept faith in the company. This allegiance has helped maintain the company's lofty valuation, although analysts remain cautious. The average analyst rating suggests holding shares, with a price target that forecasts further declines.
Palantir has emerged as a cult favorite among retail investors, who have heavily bought into the company's stock in recent months. According to JPMorgan data, Palantir was among the most-purchased securities by individual traders last week. This buying frenzy was partly driven by excitement around artificial intelligence and speculation on potential benefits from a potential Trump presidency return. In November alone, Palantir's stock surged over 60%, becoming the best performer in the S&P 500.
Despite these gains, Palantir's recent stock performance has caused some market participants to pause. The company's high valuation and news of Karp's stock sale plan have raised questions about its future trajectory. Furthermore, with defense budget cuts looming, there is uncertainty about how these factors will affect Palantir's operations and financial outlook.
Palantir actively engages with retail investors, with executives like Karp directly addressing them during earnings calls and video messages. This approach has strengthened the company's ties with its investor base, though analysts remain skeptical about its sustainability given current valuations.