Article:
Denver, Colorado – March 21, 2025 – Palantir Technologies Inc. (NYSE: PLTR), the data analytics and artificial intelligence (AI) powerhouse, is facing a sharp correction after a 340% surge in 2024 made it the best-performing stock in the S&P 500. Following its peak near $125 per share on February 18, the stock has since tumbled 30%, with analysts warning that it could fall much further.
Valuation Concerns Trigger Sell-Off
Palantir’s sky-high valuation has been under scrutiny for months. The company briefly hit a price-to-sales (P/S) multiple of 107, a level rarely seen in the software sector. For context, only six software stocks over the last two decades have crossed a P/S of 100, and every single one eventually cratered by an average of 80%.
Wall Street analysts have been vocal about their concerns:
- Gil Luria, D.A. Davidson: Palantir is trading at an “unprecedented premium” to its peers.
- Gregg Moskowitz, Mizuho: “We find it increasingly difficult to justify Palantir’s high multiple.”
- Brent Thill, Jefferies: “We’ve never seen a multiple like this.”
Historical Precedents Suggest More Pain Ahead
The recent drawdown may only be the beginning if history is any guide. Here’s how other software stocks with extreme valuations fared:
- Bill Holdings (P/S of 103x) declined 87% and remains 86% below its peak.
- Cloudflare (P/S of 114x) dropped 83% and is still 46% below its high.
- Snowflake (P/S of 184x) plunged 73% and is 61% below its peak.
- Zoom (P/S of 124x) collapsed 90% and is still 87% below its high.
If Palantir follows the same pattern, it could fall by more than 70% from its current price, which would place shares below $26.
External Risks Weigh on the Stock
In addition to valuation concerns, insider selling, potential Pentagon budget cuts, and fears of tariff impacts on the U.S. economy have intensified selling pressure.
What’s Next for Palantir?
Despite its recent pullback, Palantir remains a dominant force in AI-driven data analytics, with major government and commercial contracts. However, its lofty valuation may continue to face downward pressure as the market reassesses its growth expectations.
Investors should brace for further volatility, as Palantir’s correction appears far from over based on historical software stock performance.
