The Palantir Technologies logo is displayed on a shipping container at the companys booth during the Consumer Electronics Show (CES) in Las Vegas, Nevada on January 5, 2023. (Photo by Patrick T. Fallon / AFP) (Photo by PATRICK T. FALLON/AFP via Getty Images)
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Palantir Technologies (PLTR) has faced challenges in the past. Its stock has fallen by over 30% within less than 2 months on three separate occasions in recent years, erasing billions in market capital and eliminating considerable gains in a single correction. If past trends indicate anything, PLTR stock is not shielded from abrupt, severe drops.
Despite Palantir’s remarkable rise over the last year, driven by accelerated adoption of its AI platform and significant commercial growth, the stock’s high valuation might be unsustainable. Trading at ratios significantly higher than industry standards, its current momentum subtly uncovers a weakness: any minor mistake in execution or change in economic conditions could lead to a rapid adjustment, necessitating flawless growth to maintain its elevated status.
What Could Send The Stock Crashing?
- Valuation Risk: High valuation (107x 2025 P/S) creates significant downside risk, seen in a 17% stock drop in Nov 2025. Robust Q3 2025 revenue growth (63%) and raised FY25 guidance ($4.398B) partially mitigate this.
- Rising Competition: Decreasing AI costs and expanding LLMs lower entry barriers, increasing competition. Analysts forecast moderating growth (35% YoY for 2026), potentially impacting margins. Palantir’s AIP and recent defense deals (e.g., Exiger, Nov 2025) provide some market defense.
- Ethical and PR Issues: Ongoing concerns over government surveillance contracts, such as ICE’s ImmigrationOS, pose risks of reputational damage or regulatory backlash. Palantir’s focus on AI ethics, along with the CEO’s defense of client selection and the company’s new defense contracts, offers some mitigation.
What’s The Worst That Could Happen?
When sizing up risk, it’s worth looking at how PLTR has behaved in tough markets. During the Covid pandemic, it fell about 22.5% from peak to trough. The inflation shock hit harder, with a drop of roughly 85%. Even stocks that seem solid take a big hit when volatility spikes. So despite positive factors, PLTR’s history shows it can still face steep declines in a crisis.
But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, and outlook changes. Read PLTR Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
Is Risk Showing Up In The Company’s Financials Yet?
Let’s take a look at fundamentals
- Revenue Growth: 47.2% LTM and 29.3% last 3-year average.
- Cash Generation: Nearly 46.0% free cash flow margin and 21.8% operating margin LTM.
- Valuation: Palantir Technologies stock trades at a P/E multiple of 395.9
*LTM: Last Twelve Months
If you want more details, read Buy or Sell PLTR Stock.
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