Palantir bulls should digest these other top worries

The first unwind of the market's favorite trade of 2025 begins.

Shares of Palantir (PLTR) plunged 10% to $112 on Wednesday following a one-two punch of negative news. Shares lost another 2% in pre-market trading on Thursday, and the company's ticker page was the most active on the Yahoo Finance platform.

As to the first driver of the sell-off, the company revealed late Tuesday that outspoken co-founder and CEO Alex Karp adopted a 10b5-1 trading plan for the maximum sale of 9.975 million shares of Class A common stock. The duration of the trading arrangement is until September 12, 2025.

The disclosure sent a signal to the bulls that perhaps Karp views the stock as overvalued following a blistering 58% run-up in this year prior to Wednesday's slide.

Other Palantir insiders have also been aggressively selling stock, too, according to Yahoo Finance data.

Meantime, CNN reported that new Defense Secretary Pete Hegseth ordered a defense spending cut of 8% each year for the next five years. Palantir earns a good chunk of business from government contracts, and part of the run-up in the stock has been fueled by a perception the Trump administration would be friendly toward defense spending.

But lost in the shuffle of the above are fresh red flags on Palantir dropped in its annual report the same day as Karp's new stock trading plan.

One, Palantir's headcount only increased 5% year over year in 2024 following a 3% drop in 2023. The company has only added 98 heads the past two years, calculates Jefferies tech analyst Brent Thill.

Two, on February 12 the company's chief accounting officer Heather Planishek announced her decision to step down from her position effective February 24. The company's CFO David Glazer will assume her responsibilities on an interim basis starting Feb. 25.

And three, Palantir continues to overly rely on its top customers for business — its top three customers accounted for 17% of revenue in 2024.

The news flow this week is a dent in the teflon trade that had become Palantir this year.

The company reported on Feb. 3 that fourth quarter US revenue surged 52% from the prior year. Sales to commercial and government clients rose 64% and 45% year over year, respectively. Adjusted operating profit margins soared to 45% from 34% a year ago.

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Adjusted operating profits almost doubled in 2024 to $1.13 billion.

Since Palantir reported results, Yahoo Finance data shows there have been several upward revisions to EPS expectations for 2025 and 2026 by Wall Street analysts.