Palantir shares fell more than 6% in early trading Wednesday after Democrats won control of Congress, then pared the loss to 1%. A smaller Pentagon budget could hurt the company, yet analysts at Barclays and Bank of America stayed positive.
Palantir Technologies shares sold off more than 6% in early trading after the midterm elections handed Democrats control of both the U.S. Senate and House of Representatives. The stock then pared its losses to just 1% as of 11:15 a.m. ET on Wednesday.
Wall Street's reaction to the change in government looks muted, and even positive in Palantir's case, according to The Motley Fool.
Defense budget faces a cut
President Donald Trump had requested $1.5 trillion for fiscal year 2027 defense spending in the months before the election. A Democratic Congress may not approve anything like that.
At last report, the Senate will have 54 Democrat votes to 44 Republicans, while the House tilts blue 228-139 with 68 seats unconfirmed. Politico reports the Pentagon plans to cut its spending request from $1.5 trillion to $1.1 trillion.
Palantir draws more than half its revenue from government contracts, many of them military, so a smaller budget could be bad news for the company.
Analysts point to commercial growth
Even so, Wall Street seems unconcerned. Barclays analyst Anthony Valentini raised his target price on Palantir to $273 with an overweight rating, StreetInsider.com reports.
Bank of America's Mariana Perez Mora reiterated her buy rating with a $255 price target that implies 47% upside. She argues Palantir can no longer be viewed only as a government services and software provider, because its commercial growth engine is running hot.
The numbers behind that view: government sales grew 78% year-to-date, while commercial sales year-to-date roughly doubled. If Palantir can pivot to its commercial business and keep growing at this rate, the stock should do just fine, according to The Motley Fool.
Source: The Motley Fool
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