Palantir’s Market Rollercoaster: Valuation Concerns Clash With Record Performance

The stock of data analytics firm Palantir is experiencing significant volatility, caught between a surge of record-breaking financial results and a wave of intense short-selling pressure. While the company’s fundamental business metrics appear stronger than ever, a brutal attack on its sky-high valuation has triggered dramatic price swings. This leaves investors questioning whether the sell-off represents a healthy market correction or the beginning of a more profound downturn for the AI-focused company.

Stellar Quarterly Performance

Palantir’s second-quarter 2025 performance exceeded even the most optimistic forecasts. The company shattered a significant milestone by surpassing $1 billion in quarterly revenue for the first time, representing a substantial 48% year-over-year increase. The most explosive growth occurred within its U.S. commercial division, where revenue skyrocketed 93% to reach $306 million. In response to these powerful results, management confidently raised its full-year guidance, signaling strong belief in the durability of its current expansion.

Citron Research’s Scathing Critique

This bullish momentum was sharply interrupted when Citron Research, a well-known short-selling firm, issued a damning report. The analysis set a price target of just $40 per share—a staggering 75% below the stock’s trading level at the time. Citron’s central argument was that Palantir’s valuation had become completely unsustainable. The market reaction was swift and severe: the stock plummeted more than 17% over a six-session losing streak, wiping billions of dollars from the company’s market capitalization.

The Persistent Valuation Dilemma

At the heart of the volatility is Palantir’s status as one of the most expensive stocks in the technology sector. Trading at a price-to-earnings ratio of 249 and a price-to-sales multiple exceeding 115, its valuation metrics stand out even within the AI investment bubble. These extreme multiples leave the equity particularly vulnerable to shifts in market sentiment and critical analyst revisions, precisely the scenario now unfolding.

Should investors sell immediately? Or is it worth buying Palantir?

Growing Wall Street Skepticism

The analyst community is gradually adopting a more cautious stance toward Palantir. The prevailing consensus recommendation is shifting toward “Hold,” and the average price target of $88.17 implies a potential downside of approximately 31% from current levels. There is a palpable and growing concern among market experts regarding the long-term viability of the company’s current valuation.

Underlying Business Strength Remains Intact

Despite the valuation controversy, Palantir’s core business operations demonstrate remarkable strength. Its government segment continues to provide a stable revenue foundation through lucrative contracts with defense and intelligence agencies. Simultaneously, the commercial business is expanding at an unprecedented rate. The company’s ongoing strategic diversification away from government dependency is progressing successfully, opening substantial new growth markets.

For investors, the critical question remains whether this recent pullback represents a buying opportunity within a longer-term growth story or the initial phase of a sustained de-rating. While the fundamental operational data presents a compelling bullish case, market narratives can sometimes outweigh financial figures in the short term.