Palantir (PLTR-9.96%) has continued to see a decline, slipping 8% on Monday morning after last week’s significant fall, influenced by a newly announced share sales initiative announced by the CEO and a media report highlighting potential cuts to the U.S. defense budget. Currently, the stock is down roughly 30% from its peak earlier this month.

The outlook for Palantir could be adversely impacted by potential defense budget reductions, especially considering it reported a staggering 45% revenue increase from U.S. government contracts in the last quarter. Total revenue for the quarter reached $828 million, marking a 36% increase compared to last year, and a 14% rise from the previous quarter.

Despite the recent dip, the stock has appreciated approximately 300% over the last year and is currently valued at around 490 based on its historical earnings, and approximately 190 based on its estimated future earnings. In comparison, the average price-to-earnings ratio for companies within the Nasdaq Composite Index is just below 42, significantly higher than the historical average for that index.

“While revenues and net income have been rising consistently, they aren’t increasing at the same pace as the stock’s growth,” stated Michael Rechenthin, head of R&D at Tastylive, a platform designed for options traders, earlier this month, prior to the recent drop.

Palantir experienced a notable deceleration in revenue from the U.S. government in 2021 and 2022, leading experts to predict a high probability of a repeat scenario, which could lead to a decrease in valuation multiples, according to William Blair analysts mentioned by Barron’s.

Even without significant negative developments, the stock had previously been trading at inflated levels, with many analysts suggesting that the rally was likely to lose momentum as investor enthusiasm dwindled. Bob Lang, founder of Explosive Options, noted before the stock’s decline, “The stock isn’t invulnerable.”