Why Palantir Stock Crashed This Week: The Brutal Truth Behind the Plunge

Palantir's stock just got hammered—here's what really went down.

Earnings Miss Sparks Panic

The data analytics firm delivered numbers that fell short of Wall Street's sky-high expectations. Revenue growth slowed more than projected, and guidance came in weaker than analysts wanted to see. Investors bolted for the exits faster than you can say 'overvalued tech stock.'

AI Hype Meets Reality Check

Everyone piled into Palantir betting on its artificial intelligence narrative, but this quarter proved that even the shiniest AI story can't escape fundamental business metrics. Contracts didn't materialize as quickly as promised, and customer acquisition costs climbed. Turns out, selling expensive software to governments and enterprises isn't as easy as drawing predictive circles on a map.

Institutional Investors Flee

Major funds dumped positions after management failed to provide convincing answers about sustainable growth. When the big money moves, retail gets crushed—another classic case of Wall Street privatizing gains and socializing losses. The stock got caught in that perfect storm of high expectations and disappointing execution that leaves bagholders wondering what happened.

Palantir's stumble serves as a reminder that in markets, sometimes the most sophisticated data analysis platforms can't predict their own stock performance. Maybe they should've run their numbers through their own software.

Palantir's sales multiple dwarfs OpenAI's

Citron Research, the short seller behind theimbroglio, released a note immediately following news that OpenAI was raising another $6 billion at a $500 billion valuation. Citron pointed out that this means OpenAI's implied price-to-sales (P/S) ratio is 17 and that this WOULD make it by far one of the most expensive software-as-a-service (SaaS) stocks ever. In fact, a P/S of 17 gives OpenAI the "highest multiple of any scaled SaaS stock in the world."

Though Palantir's stock price has fallen this week since the short report, it still carries a P/S of 115 -- nearly 7 times that of OpenAI. OpenAI is one of the most influential companies in decades and is growing at a lightning pace -- a pace that far outstrips Palantir's -- yet Palantir's stock is significantly higher.

Image source: Getty Images.

If Palantir stock traded with the same multiple, 17 times sales, it would be priced at $40 a share -- and it would still be one of the most expensive SaaS stocks on the market. Citron says this is not rational, and I agree.

Palantir is undoubtedly a strong company, but its stock is just too expensive. I would avoid it.