Query: How would you’re feeling should you owned Palantir Technologies stock (NASDAQ: PLTR) and it dropped by 50% or extra within the coming months? It might sound excessive, however such a state of affairs has occurred earlier than – and it may occur once more. To this point this yr, Palantir’s inventory has seen appreciable volatility. The inventory rose by over 60% since early January to over $120 per share by mid-February and has misplaced about 38% from these highs and at the moment trades at ranges of about $80 per share. Palantir has benefited from the surging curiosity in generative AI, the re-election of Donald Trump to the U.S. Presidency, and the robust earnings in current quarters. Nevertheless, the broader markets are seeing an enormous selloff, pushed by rising issues of a recession within the U.S. following President Donald Trump’s tariffs on key buying and selling companions. Palantir’s inventory might be notably weak to a big correction, given its wealthy valuation.
Picture by Tumisu from Pixabay
Right here’s the purpose: throughout an financial downturn, PLTR inventory may endure important losses. Latest proof from 2022 exhibits that PLTR inventory misplaced over 70% of its worth inside just some quarters. Now, Palantir’s inventory is already down from ranges of $120 to $80 within the matter of some weeks. So, may Palantir inventory proceed its decline and fall to ranges of about $40 if an analogous state of affairs have been to happen? After all, particular person shares are typically extra risky than a diversified portfolio – so should you search progress with much less volatility than a single inventory, think about the Excessive-High quality portfolio, which has outperformed the S&P 500 and delivered returns exceeding 91% since its inception.
Why Is It Related Now?
Palantir’s income progress faces dangers. About 55% of 2024 income got here from authorities contracts, which are sometimes unsure and lumpy, making them much less predictable. Furthermore, the brand new Trump Administration has been working to ease geopolitical tensions, together with mediating between Ukraine and Russia and addressing the Israel-Palestine battle. Whereas these efforts are a web optimistic for international stability, they may dampen demand for Palantir’s software program and companies, which generally thrive throughout occasions of geopolitical uncertainty. Palantir’s long-term progress will depend on the industrial market, which the corporate caters to by way of its Foundry platform, which targets prospects in industries together with manufacturing, retail, and healthcare. Whereas the industrial enterprise has seen traction – with U.S. industrial gross sales rising 64% in the latest quarter in comparison with 45% progress in U.S. authorities gross sales – there might be headwinds. The corporate’s ticket sizes are sometimes giant, and implementation can be advanced and costly, which means that the product might not scale as properly with small and medium-sized corporations. This might impression progress going ahead.
Palantir’s margins may come below stress. Whereas margins have expanded lately, rising from about 26% in 2023 to almost 35% in 2024, this pattern might not proceed. The corporate has stored advertising bills in verify on account of its extremely custom-made merchandise and powerful buyer loyalty. Palantir’s engineers work intently with purchasers to tailor options to particular wants. Nevertheless, if Palantir adjusts its technique to focus on a broader buyer base, prices may rise, impacting margins. Moreover, competitors from diversified tech giants reminiscent of Microsoft, who can cross-sell options to present prospects who use their enterprise instruments, additionally poses one other danger to Palantir’s pricing energy and profitability.
How resilient is PLTR inventory throughout a downturn?
PLTR inventory has seen an impression that was worse than the benchmark S&P 500 index throughout among the current downturns. Whereas buyers have their fingers crossed for a tender touchdown by the U.S. financial system, how unhealthy can issues get if there may be one other recession? Our dashboard How Low Can Shares Go Throughout A Market Crash captures how key shares fared throughout and after the final six market crashes.
Inflation Shock (2022)
• PLTR inventory fell 67.6% from a excessive of $18.53 on 3 January 2022 to $6.00 on 27 December 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The inventory absolutely recovered to its pre-crisis peak by 31 July 2023
• Since then, the inventory has elevated to a excessive of $124.62 on 18 February 2025 and at the moment trades at round $78
That being mentioned, inventory markets are sometimes myopic and have a tendency to extrapolate short-term traits for the long term. In Palantir’s case, markets anticipate the AI frenzy to maintain going, with Palantir persevering with to notch up shares within the industrial facet of the enterprise, diversifying away from its core authorities enterprise. Nevertheless, there are appreciable dangers right here.
Valuation
Palantir Applied sciences’ Revenues have grown significantly over current years, rising at an common fee of 23.0% over the past 3 years (vs. a rise of 6.9% for S&P 500). Nevertheless, with the inventory buying and selling at a really lofty 48x consensus FY’25 income and about 140x FY’25 earnings, Palantir might be extra weak to the broader financial image. Excessive a number of progress shares typically falter throughout downturns as slower earnings progress sometimes interprets into appreciable compression in P/E multiples. Furthermore, buyers sometimes rotate into extra defensive sectors amid heightened danger aversion.
Protect & Develop Wealth with Threat-Targeted High quality Portfolios
Given this slowdown in progress and broader financial uncertainties, ask your self this query: Do you propose to carry your PLTR inventory now, or will you panic and promote if it begins to drop to $50, $40, and even decrease ranges? Holding onto a declining inventory is rarely straightforward. Trefis collaborates with Empirical Asset Administration—a Boston space wealth supervisor—whose asset allocation methods yielded optimistic returns in the course of the 2008-09 interval when the S&P misplaced greater than 40%. Empirical has built-in the Trefis HQ Portfolio on this asset allocation framework to supply purchasers with higher returns and diminished danger in comparison with the benchmark index; providing a much less risky expertise, as mirrored within the HQ Portfolio efficiency metrics.
| Returns | Mar 2025 MTD [1] |
2025 YTD [1] |
2017-25 Whole [2] |
| PLTR Return | -8% | 3% | 231% |
| S&P 500 Return | -6% | -5% | 149% |
| Trefis Bolstered Worth Portfolio | -7% | -9% | 618% |
[1] Returns as of three/12/2025
[2] Cumulative complete returns because the finish of 2016
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The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.
