Palantir (PLTR) has had powerful catalysts on both the positive and negative side, providing reasons for the ups and downs for PLTR stock. On the positive side, the company is growing extraordinarily quickly, it continues to win big contracts from Washington, and many retail investors have become quite enamored with the name.
On the negative side, some on the Street have become quite worried about the firm’s huge valuation, while large growth names and defense stocks appear to be falling out of favor.
At this point, although there are reasons for both the ups and downs of PLTR stock, the bearish forces are ascendant, as Palantir’s shares fell for a sixth straight trading day on August 20, bringing their losses over the five sessions which ended on that day to 13.8%.
And if Fed Chairman Jay Powell signals that the central bank won’t be cutting interest rates significantly anytime soon, growth stocks, including Palantir, are likely to fall meaningfully in the short-to-medium term.
The Positive Catalysts of Palantir Stock
PLTR is growing extremely quickly, with its revenue jumping 48% in the second quarter versus the same period a year earlier to slightly above $1 billion. The company’s sales from U.S. businesses soared an incredible 93% year-over-year, while its revenue from Washington climbed 53% YOY.
Meanwhile, Palantir continues to win big deals from federal agencies, with the tech giant, for example, recently obtaining a huge contract valued at up to $10 billion from the Army.
It’s certainly possible that the close connections between PLTR co-founder Peter Thiel and U.S. Vice President JD Vance are making it easier for the company to obtain big orders from Washington.
Finally, many retail investors have fallen in love with PLTR, as they put $1.2 billion into the name in July alone.
The Negative Catalysts of PLTR Stock
After rallying an incredible total of over 1,700% between its IPO and Aug. 16, Palantir’s valuation is astronomical. Specifically, it’s changing hands at a forward price-earnings ratio of 243.9 times. As shown by the fact that only four of 19 Wall Street analysts who cover the name have a Buy rating on it, many on the Street appear to have become convinced that the shares are simply too expensive.
Another factor that may be weighing on Palantir is the recent struggles of very large growth stocks, since PLTR is certainly in the latter category. As Yahoo Finance explained on August 19, “After months of concentration in a handful of growth giants, leadership has begun to broaden out,”
Finally, defense stocks have not performed well in the last week, with the Global X Defense Tech ET (SHLD) retreating about 5% in the five trading days that ended on August 20. A key factor behind the sector’s weakness is likely the talks that have been held this month in an effort to end the Ukraine War.
Powell Could Push PLTR Stock Down Further
Although President Donald Trump has been relentlessly pushing the Fed to lower interest rates, Powell could pour cold water on the prospects for cuts during a key speech he’s due to make on August 22. Despite the fact that job growth was quite weak in July, inflation has shown signs of heating up in June and July.
Because higher rates are negative for growth stocks and many expect the Fed to cut at its upcoming meeting, PLTR could fall sharply if Powell indicates that rate cuts actually aren’t imminent.
The Bottom Line on Palantir Stock
There are certainly many reasons for the ups and downs for PLTR stock. Although the name is currently in a downturn, it could easily rebound sharply over the longer term if it continues to generate spectacular growth.
*This article is intended to be informational only; it is not financial advice.
