Why Is Palantir Stock Falling?

The stock market seemingly always has a shooting star or two every fiscal quarter. With technological advances happening at such a fast clip, there’s a certain price volatility associated with technology companies that investors need to be wary of.

One of the big shooting stars last year was Palantir Technologies (NYSE: PLTR) of Denver, Colorado, a big data and analytics company. 

Palantir went public at the end of September with an IPO offering at $10.00 a share despite co-founder Joe Lonsdale’s musings in 2019 about the company being years away from doing so. 

After a jolt up in price in November, the stock price is now falling and there are viable reasons for this. To get to where we need to be, we must first look at how it all began.

Palantir Technologies was founded in 2003 in Palo Alto, California in the heart of Silicon Valley. The company was founded by a meshing of Stanford University computer scientists and executives of PayPal (PYPL).

The Stanford crew comprised of scientists Joe Lonsdale and Stephen Cohen with Alex Karp, a Stanford Law school alumnus.

Nathan Gettings and Peter Thiel (coincidentally, also a Stanford alumnus) represented the brains and financial banking, respectively of PayPal.

The Palantir Five laid the groundwork for the company’s success, one client at a time. The climb was slow and methodical and every fiscal year, the company would add more contracts.

Palantir Contracts Have Grown Steadily

Palantir crossed a major threshold in 2010 when it acquired a service contract for JPMorgan Chase (JPM), a Fortune 500 company, thus becoming Palantir’s first commercial client.

This acquisition led to larger contracts and the company passed $1B in net worth in 2011. Palantir currently holds lucrative contracts with many arms of the United States Military including the Department of Defense.

The company also holds contracts for the National Health Service of the United Kingdom and the Colombian government for contract tracing and virus protection data during the ongoing Coronavirus global pandemic.

Palantir Stock Price Trend

After many years of massive operating losses, Palantir saw a sharp rise in revenue during Q3 and there are rumors of the company possibly operating in the black during Q1 this year. 

These promising reports in November caused PLTR share price to rise rapidly after a flat first month of trading in October.

After an initial IPO at $10.00, the price stayed fairly even during the month and finished at $10.13 on October 31st.

The price skyrocketed to $27.11 by November 30th but has since started to fall back to earth.

Palantir Customer List Is Impressive

The coronavirus pandemic has brought new business to companies in the tech sector with Palantir Technologies being one of the biggest beneficiaries of this newfound push.

These new avenues of revenue have bolstered Palantir’s already-impressive list of clients in the security and surveillance data sectors.

To highlight the incredible luck of the company to be in the right business sector and the right time, we can juxtapose these numbers to another similar tech company with a recent IPO, Rackspace Technology (NYSE: RXT).  

Rackspace offered its IPO in August at $21 a share and is now trading at $19.69. Rackspace concentrates its business towards enterprise data with end-to-end multi-cloud platforms. 

Possible Storm Clouds In The Distance

When Palantir Technologies unveiled its IPO on September 30th, the company also instituted a lock upon company insiders to limit trading. 

Company insiders were limited to only selling 20% of their holdings until the final earnings release for fiscal year 2020. 

This next earnings release is scheduled for sometime in February and when that happens, the training wheels could come off.

With the remaining 80% of insider shares being available to trade, the volume of stock traded should increase and possibly cause the already falling price of Palantir Technologies stock to fall further back to “normal” ranges.

Why Is Palantir Stock Falling?

Palantir Technologies is a company that has a great base for possible future growth. The company has a stellar client list with American Military and foreign countries leading the charge. These contracts will provide ample revenue for the short-term and offers a rosy outlook for the next few quarters. 

Palantir’s historical track record does not invoke confidence in these new assets, unfortunately. The company’s long history of massive operating costs and losses factor into this line of thinking.  

Palantir Technologies stock price has fallen for two major reasons which can be outlined below. The announcement of Q3 numbers which caused a sensation amongst investors and traders to cause the price to balloon 3X over its initial IPO in October.

The numbers were the best showing by the company in its history and due to this fact plus the aforementioned new contract acquisitions during the pandemic, speculators forecast big things for Palantir in the short term. With the Stanford Collective hard at work behind the scenes, it was hard for speculators not to come to that conclusion.

Unfortunately, the Palantir balloon is slowly leaking air. This leak can be attributed to the second main reason and that is uncertainty.

The continued rollout of the Coronavirus vaccine will no doubt have an effect on the pandemic. This is good for the general populace but bad for Palantir and its contracts with data tracing and virus prevention. Those contracts could conceivably dry up in another 12-24 months. The other branch of uncertainty lies on the increase in stock volume next month and how much that will affect the stock price.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.