Palantir stock falls amid valuation concerns despite Q4 outlook beating Wall Street estimates

Palantir (PLTR) stock fell Tuesday as Wall Street analysts debated whether its latest solid earnings report justified its soaring valuation.

Shares fell over as much as 10% in early Tuesday trading, erasing the 7% jump that came in the immediate wake of the report.

Palantir’s fourth quarter guidance came in above Wall Street’s expectations Monday after the bell despite some analyst concerns over the impact from the ongoing US government shutdown.

Palantir said it foresees revenue of just over $1.3 billion for the fourth quarter, ahead of the $1.2 billion projected by Wall Street analysts tracked by Bloomberg. The defense tech firm expects to see an adjusted operating income between $695 million and $699 million for the period, more than the roughly $575 million expected.

The company also lifted its full-year revenue guidance to $4.4 billion from its previous outlook of $4.15 billion.

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But the stock was poised for big losses on Tuesday, pulling back from Monday’s record close, as multiple Wall Street analysts voiced concerns that Palantir’s performance and guidance fail to justify its valuation. Shares are up more than 170% for the year and trade at a forward 12-month price-to-earnings ratio of 230, far above the P/E ratio of 35 for the “Magnificent Seven” Big Tech stocks, per Bloomberg data.

“We believe the risk/reward is unfavorable as the current valuation is susceptible to any downtick in the AI hype cycle,” Jefferies analyst Brent Thill wrote in a note to investors Tuesday, maintaining his Underperform rating on the stock.

Palantir sells its artificial intelligence software to businesses and governments in the US and abroad. Its tech does everything from supply chain analysis to surveillance and identifying military targets. The firm’s deals with the Israeli military and ICE have drawn public backlash.

The company’s third quarter results also topped analyst estimates. Its adjusted earnings per share of $0.21 were ahead of the $0.17 expected by Wall Street and more than double its EPS of $0.10 in the third quarter of 2024.

The defense tech firm reported revenue of $1.18 billion for the three months through Sept. 30, a 63% increase from the previous year and above the $1.09 billion expected by Wall Street analysts tracked by Bloomberg.

Driving that revenue beat was Palantir’s business in the United States. Its revenue from US government contracts jumped 52% to $486 million, above the $471 million expected. The company’s US commercial segment, meanwhile, saw revenue soar 121% year-over-year to $397 million, higher than the projected $342 million.