Palantir Technologies (NASDAQ: PLTR) was the best performing member of the S&P 500 (SNPINDEX: ^GSPC) last year. The stock advanced 340% in 2024 as the company delivered a series of strong financial results driven by demand for its artificial intelligence platform.
However, after peaking around $125 per share earlier in February, the stock has since plunged 27% because shareholders received worrisome news from CEO Alex Karp and the Pentagon. Here are the important details.
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CEO Alex Karp could sell nearly 10 million shares of Palantir stock in 2025
Palantir filed its Form 10-K on Feb. 18. The document showed CEO Alex Karp had replaced his previous trading plan with an updated version allowing for the sale of approximately 10 million shares through September 12, 2025. President Stephen Cohen also signed a trading plan allowing for the sale of 4 million shares through the same date.
Those arrangements, known as 10b5-1 plans, protect executives from accusations of illegal insider trading. The written agreements can only be signed during specific periods when the insider has no consequential non-public information, and they execute automatically under predefined conditions.
However, insiders selling stock under any circumstances still raises questions about whether they have lost confidence in the company, or whether they believe the stock is overvalued. And several Palantir executives unloaded a lot of stock last year, as detailed below:
- CEO Alex Karp sold 40.7 million shares in 2024 at an average share price of $47.99, bringing the total proceeds to $2 billion.
- CFO David Glazer sold 1.2 million shares in 2024 at an average share price of $43.90, bringing the total proceeds to $55.8 million.
- CRO Ryan Taylor sold 1.5 million shares in 2024 at an average share price of $33.41, bringing the total proceeds to $50.6 million.
- CTO Shyam Sankar sold 6.6 million shares in 2024 at an average share price of $61.76, bringing the proceeds to $410.7 million.
- President Stephen Cohen sold 3 million shares in 2024 at an average share price of $49.87, bringing the total proceeds to $152 million.
To be clear, readers should not assume the executives above have lost confidence in Palantir, nor should they assume the executives believe shares are overvalued. Insiders may sell stock for countless reasons and many are benign, such as portfolio diversification. Nevertheless, CEO Alex Karp could unload a significant amount of stock in 2025, which may put downward pressure on the share price.
Image source: Getty Images.
The Pentagon may reduce defense spending
In February, The Washington Post and Bloomberg reported Defense Secretary Pete Hegseth asked Pentagon officials and other military leaders to propose ways in which the defense budget could be reduced by 8% annually over the next five years. Details concerning the cuts remain scant, but the reports raise questions about whether Palantir will be affected.
Palantir has contracts with several Defense Department agencies, including the Air Force, Army, Navy, and Special Operations Command. In total, the company reported $1.2 billion in revenue from U.S. government customers in 2024, representing approximately 42% of total revenue. So, Palantir theoretically has a lot to lose from defense spending cuts.
However, Dan Ives at Wedbush Securities sees the situation as a positive development for the company. He argues the focus on efficiency means Palantir will receive "more IT budget dollars at the Pentagon, not less." Nevertheless, investors are clearly nervous given that Palantir stock has fallen nearly 30% in a week.
Palantir stock still looks expensive despite falling 27%
Palantir is undoubtedly near the top of many investors' watchlists. But Wall Street estimates the company's adjusted earnings will increase 35% in 2025. That consensus makes the current valuation of 220 times adjusted earnings look very expensive.
Nevertheless, the median target price among analysts is $97 per share. That implies about 7% upside from its current share price of $90. Personally, I would be more interested in buying the stock if the share price fell another 10% to 20%. But investors eager to add Palantir to their portfolios can start with a very small position today, provided they have a time horizon of at least three years.
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Trevor Jennewine has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
