After a dramatic bull run in recent weeks, Palantir Technologies (NYSE: PLTR) stock was finally giving up gains, as investors seemed to be taking profits after Friday's pop. That jump was driven by Palantir's announcement that it would be listing as a Nasdaq stock and that it expected to join the Nasdaq-100, which would trigger exchange-traded funds (ETFs) that track that index to buy the high-flying artificial intelligence (AI) stock.
Among 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.
Palantir stock was down 5.38% as of 11:45 a.m. ET.
Image source: Getty Images.
Palantir cools off
A pullback in Palantir stock seemed inevitable after it had jumped more than 50% since its earnings report on Nov. 4, lifting its price-to-sales ratio above 50.
Palantir is also one of the best-performing stocks of the year, up more than 250%, and it gained admission to the S&P500(SNPINDEX: ^GSPC), helping to fuel those gains. However, even as Palantir has reported accelerating revenue growth and expanding margins this year, most of the stock's growth has come from multiple expansion, which is a reflection of Wall Street's improving view of the business.
Is Palantir overvalued?
Palantir's market cap is now approaching $150 billion, and its price-to-sales ratio is up to 52.8. Based on conventional metrics, the stock does look overvalued.
That doesn't mean Palantir doesn't have a bright future ahead of it, but it will take the business some time to grow into its current valuation. Investors shouldn't expect the stock's surging gains to continue, and an extended pullback at this point wouldn't be a surprise.
Should you invest $1,000 in Palantir Technologies right now?
Before you buy stock in Palantir Technologies, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $870,068!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of November 18, 2024
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
