- Palantir Technologies Inc. (PLTR) shares fell 10.08% to $112.06 in regular trading and dropped another 4.72% after hours due to CEO Alex Karp’s plan to sell nearly 10 million shares and news of potential U.S. defense budget cuts.
- The company, known for its defense contracts, reported a strong Q4 2024 with $828 million in revenue but faces uncertainty with the Pentagon ordered to plan for an 8% annual budget reduction over five years.
- Amidst broader government spending cuts by the Trump administration, led by Elon Musk’s “Department of Government Efficiency,” Karp defended Musk on CNBC, highlighting missed opportunities for constructive dialogue on government efficiency.
Shares of Palantir Technologies Inc. (PLTR) took a significant hit, closing down 10.08% at $112.06 in regular trading on Wednesday and further declining by 4.72% to $116.80 in after-hours trading. This drop was triggered by news of CEO Alex Karp adopting a new stock trading plan to sell nearly 10 million shares over the next six months and a report from The Washington Post about impending U.S. defense budget cuts. The Pentagon, under Defense Secretary Pete Hegseth, has been directed to prepare for an 8% annual reduction in its budget for the next five years, which could impact Palantir given its significant involvement in defense contracting.
Despite the day’s losses, Palantir has been a standout performer, with its stock appreciating 48% year-to-date and boasting a market cap over $283 billion. The company reported strong Q4 2024 results with $828 million in revenue and adjusted earnings of 14 cents per share, reflecting its growth in both commercial and government sectors. However, its current price-to-earnings ratio of nearly 590-to-1 suggests high investor expectations for future earnings growth, which now face scrutiny with the potential reduction in defense spending.
The backdrop to these financial movements is a broader initiative by the Trump administration to cut government expenditure, including defense budgets, led by Tesla (TSLA) CEO Elon Musk in his role with the “Department of Government Efficiency” (DOGE). This effort has not been without controversy, facing legal challenges, and has sparked public debate. Karp, during a CNBC appearance, defended Musk’s involvement, advocating for a dialogue between Musk and critics on the left, suggesting that Musk’s expertise in efficiency could benefit government operations if approached constructively. This political and fiscal environment adds layers of uncertainty to Palantir’s business model, which heavily relies on government contracts, potentially influencing investor confidence and stock performance in the coming periods.
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