Government Budget Cuts and Goldman's Worries Weigh on Palantir Stock (PLTR)
Palantir Technologies (PLTR) stock dropped 4.74% to $84.58 on Friday, extending its losing streak to four sessions. The decline reflects broader market volatility and growing concerns over government spending cuts. Investors have been wary of Palantir's heavy reliance on government contracts, especially as budget constraints intensify. Adding to the pressure, Goldman Sachs analyst Gabriela Borges maintained a Neutral rating on the stock, citing valuation concerns and uncertainty over its long-term competitive edge.
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Oracle Setback Highlights Spending Cuts
One major factor dragging Palantir's stock lower is the U.S. Department of Defense (DoD) recently canceling its plans to use Oracle 's (ORCL) HR software due to delays and cost overruns, as reported by Bloomberg. While this decision directly affects Oracle, it also highlights broader cutbacks in government technology spending.
With the DoD as a key client, Palantir relies heavily on government contracts. Investors fear that similar cuts could affect Palantir's deals, especially as agencies reassess their tech budgets.
Defense Budget Cuts Weigh on Sentiment
Adding to these concerns, the DoD recently announced another $580 million in budget cuts, affecting multiple programs, contracts, and grants. Since the company's main strength is providing data analysis and AI tools for government clients, any slowdown in federal spending could impact its growth.
With defense budgets under pressure, Palantir's stock has taken a hit as traders worry about future revenue.
Goldman's Insights Add to Uncertainty Around PLTR Stock
Borges maintained a Neutral rating on Palantir stock, with a price target of $80 in a note dated March 28. After visiting Palantir's New York office, she shared her views on the company's core technology, The Ontology, which helps businesses organize and use their data for better decision-making.
The analyst noted that Palantir has improved this system over time, but its overall approach has remained the same. With more companies adopting AI, Palantir's AI Platform (AIP) has become a major strength. However, Borges raised a concern that as AI technology advances, companies may find it easier to build their own AI tools. If that happens, Palantir's services may not seem as unique in the future.
Another challenge she pointed out is Palantir's high valuation compared to other software firms. While the company has strong technology, its stock is more expensive than many of its peers, making some investors hesitant.
What's Next for Palantir Stock?
Palantir remains a leader in AI-driven data analysis, but the recent budget cuts and uncertainty in government spending have made investors cautious.
The company's ability to secure new contracts and maintain its competitive edge in AI will be key factors in determining whether the stock can recover from this recent decline.
Is Palantir Stock Worth Buying?
Analysts prefer to remain on the sideline on Palantir stock for now. On TipRanks, PLTR stock has a Hold consensus rating based on four Buys, 10 Holds, and four Sell ratings. The average Palantir Technologies price target of $92.13 implies 7.32% upside potential from current levels. Over the past year, PLTR stock is up over 275%.
See more PLTR analyst ratings
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