Palantir Stock: Buy, Sell Or Hold

Core Viewpoint - Palantir Technologies stock has increased over 4 times since the beginning of the year, currently trading at approximately $74 per share, but is considered a high-risk investment due to its high valuation, dependence on government sales, and significant insider selling [1] Group 1: Stock Performance and Market Drivers - The initial rally in Palantir's stock was driven by the market enthusiasm for artificial intelligence stocks and stronger-than-expected earnings in recent quarters [2] - The stock surged nearly 80% since the U.S. elections, with investor optimism surrounding increased federal spending on national security and immigration under a potential Donald Trump-led administration [2] - Palantir's inclusion in the Nasdaq-100 following its move from the NYSE has likely increased demand from exchange-traded funds [2] Group 2: Risks and Challenges - Palantir's heavy reliance on government sales poses risks, as these contracts can be unpredictable and inconsistent [3] - Commercial sales, while growing by 27% to $317 million in Q3, fell short of consensus estimates, highlighting challenges in the commercial market [3] - The company faces competition from larger tech firms like Microsoft and niche data analytics companies, which may hinder its growth in the commercial sector [3] Group 3: Valuation Concerns - Palantir's stock is trading at over 150 times consensus FY'25 earnings and about 48 times forward revenue, which is deemed unjustified given its projected growth rates of around 25% for 2024 and 2025 [5] - In comparison, competitors like Snowflake and Nvidia have lower valuations relative to their growth rates, indicating that Palantir's valuation may not be sustainable [5] Group 4: Insider Selling - There has been considerable insider selling, with CEO Alex Karp selling nearly 40 million shares and President Stephen Cohen selling over $90 million in stock, suggesting that insiders may believe the stock is fully priced [6] - This trend of insider selling could exert downward pressure on the stock price if it continues [6]