Palantir is down - should you buy?

Palantir Technologies produces advanced data analytics software for government, defence agencies, and private sector enterprises, enabling large dataset processing for intelligence, cyber security, and decision-making purposes. In just 2 years Palantir's share value gained over 1,000%. It looked as if Palantir would continue its winning streak - barely a week ago, Investor's Business Daily's Matt Krantz pitched that Palantir would be one of 2025's Magnificent Seven stocks.

Palantir: Incredible bands since late 2024.

A day later the stock began a week-long rout, plummeting 15% before another 11% in the days following until today.

The story is that several factors have created a perfect storm to precipitate a notable correction of the company's share price. Reports that Microsoft is scaling back on data center leases has raised concerns across the AI and software sector; possible budget cuts to US defence spending under the Trump administration aren't helping, given the significant number of contracts Palantir has with the US Department of Defense, and CEO Alex Karp has announced to sell nearly 10 million shares worth over $1.2 billion.

All the above has contributed to volatility, and earlier this month a Jeffries analyst reiterated their 'underperform' rating for Palantir.

So it looks like this might be a buying opportunity following an overdue correction. Palantir has good fundamentals, to name only a few points in its favour:

• Earnings growth rate 3x the US Software market.

• Profits are poised to increase 30% this year, then 25% in 2026.

• Virtually no debt.

• Currently trading at a 25% discount over the last week.

  
  

Whether a 25% discount is enough to bring it to a reasonable value is worth considering. That Palantir has been overvalued is not a controversial statement and significant retail participation in Palantir suggests a degree of speculation may have fuelled some of its recent successes. To echo Simply Alpha as of 18 February, who also predicted an incoming correction: "Palantir - 92 Times Sales Is Absurd". Furthermore, while Palantir has a strong customer base right now, including the US government, whether its customers will continue to be reliable is a question that begs whether one wants to take a risk on this suddenly revalued stock. For example, Palantir's £330 million contract with the UK's National Health Service to organise patient data has run into opposition by some patients and some medics. Under the UK's Labour government, who knows what may happen to perceived US tech influence over the UK's NHS state religion.

Notwithstanding the above, Palantir remains a good company. Its growth figures, even if they are overstated are still impressive. However, this means its share price has to get into the territory of a 'good' company in this space. As mentioned, 92 times sales is gross overvaluing and the market has been forced to now recognise this. A 1000% share price increase in only 2 years is also a major red flag in my view and leads me to believe that Palantir still has further to fall before it reaches its fair-value, however, when it does reach that point, it's a good company to consider investing in.