Why Palantir dove, despite crushing on earnings
Turns out, sometimes valuation matters.
The numbers were good. The guidance was good. The tone of the conference call was good. The stock market reaction was not.
Palantir shares are down about 13% in early trading Tuesday after the company delivered Q1 earnings results after Monday’s close that were widely viewed as pretty darn good to great.
“The company is mostly firing on all cylinders,” wrote Louie DiPalma, an analyst covering the stock for brokerage firm William Blair who raised his rating on the stock to “market perform” (essentially neutral) in early March.
Well-known Palantir bull Dan Ives — with an “outperform” rating and $140 price target on the shares — hailed the results as featuring “robust beats across the board while raising [full-year] guidance yet again as the company continues to capitalize on the AI demand wave.”
Sure, there were some items in the numbers you could quibble with. Operating margin declined to 44% from 45% in Q4 last year. Sales to international corporate clients declined. And if you really want to get picky, you could note that while the company raised full-year 2025 sales guidance, it wasn’t jacked up as sharply as last quarter.
But maybe that’s all missing the forest for the trees.
Palantir’s problem isn’t its fundamentals, but the fact that investors seem to have already paid for them, in advance, and handsomely.
That’s essentially what super high valuations on stocks represent.
And Palantir’s — 200x earnings over the next 12 months! 70x sales over the next 12 months! 60x 2026 sales! — certainly qualifies. By multiple valuation metrics, it’s by far the most expensive stock in the S&P 500.
“Fundamentals are clearly alive,” wrote Brent Thill, the Jefferies analyst covering Palantir. “But we think irrational valuation at 56x [calendar year 2026 revenue estimates] skews risk/reward negatively.”
Thill kept his “underweight” rating on the stock, with a price target of $60, implying a tumble of more than 40% from the current price.
A 13% drop is the biggest drop the stock has seen in almost exactly a year (since May 7, 2024, the day after its 2024 Q1 earnings dropped), but OG Palantir holders are accustomed to the stock’s wild moves. The stock is insanely volatile and has continued to be this year, rising 60% for the year into February before collapsing and losing all of those gains in March, and then getting them all back over the last few weeks.
But it’s a helpful reminder that Palantir — and other momentum stocks with high valuations and an intense retail shareholder base, like Meta, Nvidia, and Tesla — remain more exposed to sharp shifts in the prevailing winds of the market mood.
