Palantir Stock Drops Another 2% on Valuation Fears

Palantir shares dropped another 2.3% in premarket trading on Wednesday.

Palantir stock fell 7.9% on Tuesday as the company reported a strong quarter that left some investors with questions over the company's lofty valuation.

Jefferies analysts said Palantir's "numbers are great" but called its valuation "extreme" relative to its fundamentals in a note to clients Tuesday. They issued a price target of $70, less than half of its current value.

Analysts at William Blair and UBS, who have neutral ratings for the stock, also voiced concerns Palantir’s valuation would make it one of the more expensive names in software on a free cash flow basis, despite the better-than-expected quarterly results.

Palantir's fourth quarter guidance came in above Wall Street's expectations late Monday, defying fears some analysts had over the impact from the ongoing US government shutdown.

Palantir said it foresees revenue of just over $1.3 billion for the fourth quarter, ahead of the $1.2 billion projected by Wall Street analysts tracked by Bloomberg. The defense tech firm expects to see an adjusted operating income between $695 million and $699 million for the period, more than the roughly $575 million expected.

The company also lifted its full-year revenue guidance to $4.4 billion from its previous outlook of $4.15 billion. Even with Tuesday's decline, the stock is up over 150% this year.