Palantir Technologies (NYSE: PLTR) has been one in every of the most popular stocks available in the market this 12 months, with the stock trading up greater than 246% 12 months so far as of this writing.

CEO Alex Karp took a victory lap following his company’s most up-to-date earnings, saying the outcomes were so strong that “I almost feel like we should always just go home.” Later he took a swipe at any critics who challenged his sanity in making such a comment.

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But while Karp has been celebrating the success of his company and its stock, he has also been aggressively selling shares of Palantir. This after all begs the query, should investors follow Karp’s lead and sell Palantir stock?

Karp has been a fairly consistent seller of Palantir stock since late 2020, using what is known as a Rule 10b5-1 plan. Under these plans, company executives and other insiders arrange selling instructions to brokers to sell shares based on a wide range of parameters. It could actually be so simple as selling a set amount of shares on set dates no matter price, or it could use a set of way more complicated triggers.

Karp appears to be using a more complicated set of triggers, but whatever they’re have led to an enormous increase in selling by the CEO within the couple of months. All of those recent sales have been through the exercise after which sale of stock options.

Karp’s increased selling began in mid-September when he exercised options and sold 9 million shares at a median price of $36.18, value $325.6 million.

Just ahead of earnings he exercised options and sold a further 5.66 million shares at a median price of $45.01, taking home $254.6 million. Then immediately after earnings, he exercised options and sold greater than 12.3 million shares at a median price of $52.71, good for proceeds of $650.6 million.

Before the acceleration in selling, Karp’s sales were more within the $15 million to $22 million range.

Karp wasn’t the one insider to sell shares after earnings. Chief Accounting Officer Heather Planishek and Director Lauren Friedman Stat also sold shares via 10b5-1 plans.

This is not the primary time Palantir has seen big insider selling, with Chairman Peter Thiel establishing a Rule 10b5-1 plan and quickly disposing of greater than 28.5 million shares in September and early October.

Palantir is undoubtedly an important company. It initially proved itself by providing data gathering and analytic services to the U.S. government and helping it with such mission-critical tasks as fighting terrorism and tracking COVID-19 cases. It has since turn out to be an enormous artificial intelligence (AI) winner, with the U.S. business sector now embracing its AI platform.

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Palantir’s big AI push into the business sector has helped it see accelerating revenue growth, with revenue jumping 30% 12 months over 12 months last quarter. It was the corporate’s fifth straight quarter of revenue growth acceleration, demonstrating the momentum its solutions have. The U.S. business sector led the way in which with a 54% increase in revenue, or 59% when excluding strategic business contracts. U.S. government revenue, meanwhile, soared 40% 12 months over 12 months, as the federal government also has began to embrace its AI solutions.

At once, the corporate is doing an important job of each bringing in recent customers and expanding with existing customers. Nevertheless, the largest issue in relation to Palantir stock isn’t its operational performance, it’s with Palantir’s valuation. Following the recent surge in stock price, the stock now trades at a forward price-to-sales (P/S) ratio of 41 times 2025 analyst estimates.

For a stock growing its revenue by around 30%, that valuation is pretty extreme. While Palantir is an important company, sooner or later valuation does matter. CEO Alex Karp seems to acknowledge this as well, which is why he has accelerated his selling of the stock in recent months.

Back in August, I wrote that it was not too late to purchase Palantir stock. With this latest surge in price, I’m stepping back from that view. I believe the smart thing to do currently is to follow the lead of Karp and other insiders and take some profits within the stock after an important run.

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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Palantir Technologies. The Motley Idiot has a disclosure policy.

Palantir’s CEO Is Selling Stock; Should Investors Follow Suit? was originally published by The Motley Idiot