Palantir (PLTR) Stock Plunges 14% Despite Stellar Q3 Earnings – Bargain Hunt or Value Trap?

Big Data's poster child just got a bloody nose. Palantir's shares cratered 14% after hours—despite smashing earnings estimates. What gives?

Wall Street's Schrödinger's Stock

The numbers looked bulletproof: revenue beats, raised guidance, the whole nine yards. Yet algos dumped PLTR like a hot potato. Classic 'sell the news' behavior—or something uglier lurking in the fine print?

Buying Opportunity or Fools' Errand?

Contrarians smell blood in the water. At these levels, Palantir trades at pre-AI-hype valuations. But with government contracts slowing and commercial growth requiring microscope-level scrutiny, is this a dip worth catching—or another overhyped tech stock finding its rightful place?

Bonus jab: Nothing unites institutional investors like herd mentality—first they FOMO into AI plays, now they're stampeding for exits. Some things never change.

TLDR

• Palantir reported Q3 revenue of $1.18 billion, up 63% year-over-year, with net income rising 40% to $475.6 million
• The stock dropped 14% in the week following the November 4 earnings release despite record results
• U.S. commercial revenue surged 121% to $397 million, while U.S. government revenue jumped 52% to $486 million
• Palantir closed 204 deals worth over $1 million, including 53 deals exceeding $10 million in value
• Concerns about AI bubble fears and sky-high valuation multiples drove the post-earnings selloff

Palantir Technologies reported third-quarter results on November 4 that beat expectations across the board. But instead of rallying, the stock fell 14% in the following week.

Palantir Technologies Inc., PLTR

The data mining and AI platform company posted revenue of $1.18 billion for the quarter. That’s a 63% jump from the same period last year. Net income climbed 40% to $475.6 million.

The company’s adjusted earnings per share came in at $0.21. U.S. commercial revenue grew 121% to $397 million. U.S. government revenue increased 52% to $486 million.

Palantir closed 204 deals worth more than $1 million during the quarter. Of those, 91 exceeded $5 million in value. Another 53 topped $10 million.

The company signed $2.76 billion in total contracts. U.S. commercial clients accounted for $1.31 billion of that total.

CEO Alex Karp said the company is just getting started. He pointed out that Palantir now generates more profit in one quarter than it used to make in revenue. The company issued fourth-quarter revenue guidance between $1.327 billion and $1.331 billion.

Full-year revenue is expected to land between $4.396 billion and $4.4 billion. Despite these strong numbers, investors hit the sell button after the report.

Valuation Concerns Drive Selloff

The stock’s valuation metrics tell part of the story. Palantir trades at a price-to-earnings ratio of 623. The forward P/E sits at 217.

The price-to-sales ratio stands at 137. That compares to an industry average of 8.8 for application software companies. In other words, investors pay $137 for every dollar of Palantir’s revenue.

Even using forward revenue estimates, the P/S ratio is 103. These numbers have climbed steadily in recent years as the stock price outpaced revenue growth.

Freedom Capital Markets analyst Almas Almaganbetov raised his price target to $170 from $125. But he kept his Sell rating on the stock. He said the shares may be priced for perfection.

The analyst noted clear traction in the U.S. market. He said AI software adoption is happening faster than expected. But Europe remained flat during the quarter, continuing a trend from recent periods.

Questions About Future Growth

Almaganbetov said the outlook becomes less clear looking beyond next year. U.S. commercial growth might slow after an unusually strong year. Government and defense budgets could face pressure.

The company continues hiring AI talent, which may affect profit margins. The analyst believes the current stock price already factors in several years of strong growth. That leaves little room for any stumbles.

Karp pushed back against skeptics in his shareholder letter. He said detractors have been “left in a kind of deranged and self-destructive befuddlement.” He argued that Palantir has given retail investors returns usually limited to top venture capitalists.

The stock is still up more than 127% year-to-date. Growth has been fueled by rising global defense spending and demand for AI software. Palantir’s Artificial Intelligence Platform rolled out in mid-2023 and has driven much of the recent momentum.

The company reported an adjusted operating margin of 51% for the quarter. Palantir closed deals at what CEO Karp described as a “breakneck pace.” The U.S. commercial business showed the strongest growth among all segments.