After a dramatic bull run in recent weeks, Palantir Technologies (NYSE: PLTR) stock was finally giving up gains, as investors appeared to be taking profits after Friday’s pop. That jump was driven by Palantir’s announcement that it might be listing as a Nasdaq stock and that it expected to affix the Nasdaq-100, which might trigger exchange-traded funds (ETFs) that track that index to purchase the high-flying artificial intelligence (AI) stock.
Amongst those selling the stock was CEO Alex Karp, who filed to sell 4.5 million shares of the stock on Friday, which has a market value of $266 million. That sale was predetermined by a 10b5-1 plan, which sells stock at set intervals to avoid suspicions of insider trading.
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Palantir stock was down 5.38% as of 11:45 a.m. ET.
A pullback in Palantir stock seemed inevitable after it had jumped greater than 50% since its earnings report on Nov. 4, lifting its price-to-sales ratio above 50.
Palantir can be certainly one of the best-performing stocks of the yr, up greater than 250%, and it gained admission to the S&P 500 (SNPINDEX: ^GSPC), helping to fuel those gains. Nevertheless, whilst Palantir has reported accelerating revenue growth and expanding margins this yr, a lot of the stock’s growth has come from multiple expansion, which is a mirrored image of Wall Street’s improving view of the business.
Palantir’s market cap is now approaching $150 billion, and its price-to-sales ratio is as much as 52.8. Based on conventional metrics, the stock does look overvalued.
That does not imply Palantir doesn’t have a brilliant future ahead of it, but it’ll take the business a while to grow into its current valuation. Investors shouldn’t expect the stock’s surging gains to proceed, and an prolonged pullback at this point would not be a surprise.
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