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The titan of data analytics Palantir Technologies (NYSE: PLTR) was flying in 2024, with shares up more than 118%. But hold your horses — CEO Alexander Karp's latest sellout has raised a few eyebrows in the City.
So is there a problem with this technology stock?
Latest sales
According to recent SEC filings, Karp sold $31m worth of his shares in the three-day trading period. Now, before we all rush to hit the panic button, let's take a closer look at what's really going on here.
First things first – selling inside doesn't mean the company is always in trouble. Karp is either taking on a new luxury yacht or financing his next big idea. But I think that in this case it is worth doing slowly.
Growth is rapid
On the optimistic side of the fence, the company's growth story is still hot. Management recently reported a year-over-year 27% jump in revenue in Q2, with total revenue reaching $678.1m. It even raised full-year revenue guidance to $2.746bn.
Business has its fingers in all kinds of AI pies, too. Just the other day, it announced an exciting partnership with it Wendy's sprinkling some artificial intelligence magic into its supply chain. It's not just about better burgers – this kind of technology can completely change the way businesses operate.
Analysts sympathized with the company as well. Wedbush, for example, has a peak share price of $38. That's the kind of hope that can spring into action for any investor.
Accidents
But here's where it gets a little sticky. The value of the company increases significantly. We are talking a P/E ratio of about 175 times. That would put even the most optimistic tech bro to shame. It's the kind of number that suggests investors expect the company's software to cure cancer, solve world hunger, and find a way to make Britain's trains run on time – all before teatime.
And while the company is working with more commercial clients, it still has a small government contracting practice that may discourage some investors. Those big, juicy government deals can be as unpredictable as the British weather, which isn't exactly comforting to the faint-hearted investor.
There is also the small matter of cleaning. Managers are known to offer stock-based compensation as a fad. While it's great for attracting top talent, it can leave existing shareholders feeling like their slice of the pie is shrinking faster than wool in a hot wash.
None of them are faint of heart
So, what's a foolish investor to do? However, for those with an iron stomach, any of the dips can be an opportunity to grab a piece of the pie at the best price. But for those who prefer investments with less drama, it may be better to look at companies with very low valuations.
Success will depend on whether it can continue to generate those revenue numbers, attract more trade customers, and stay ahead of the pack. Only time will tell if Karp's share sale was a smart move or a sign of trouble.
The company's impressive numbers this year are certainly worth noting. But so is the crowded AI and data analytics space. For now, I'll be watching from the sidelines.
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