Today, there was a noticeable retreat in Palantir's share price.
Following an exciting bullish trend over the past few weeks, Palantir Technologies' (PLTR 2.60%) shares started to slip, as investors appeared to be cashing out following Friday's surge. The surge was primarily caused by Palantir's announcement of joining the Nasdaq as a listed stock and its anticipation to be a part of the Nasdaq-100, thereby prompting exchange-traded funds (ETFs) tracking this index to buy the popular artificial intelligence (AI) stock.
One of the sellers among the crowd was CEO Alex Karp, who submitted a request to sell 4.5 million shares of the stock on Friday, representing a market value of $266 million. This sale was prearranged through a 10b5-1 plan, a method used to sell shares at scheduled intervals to prevent suspicions of insider trading.
As of 11:45 a.m. ET, Palantir's stocks had dropped by 5.38%.
Palantir experiences a downturn
Given its surge of over 50% since its November 4 earnings report, a slight dip in Palantir's stock price seemed unavoidable. Its price-to-sales ratio surpassed 50, putting it into an overvalued territory.
Palantir has been one of the top performers of the year, registering a gain of over 250%, and becoming a part of the S&P500 (^GSPC 0.12%), contributing to its impressive rise. Despite reporting an accelerated revenue growth and expanding margins this year, most of the stock's rise has been due to multiple expansion, a reflection of Wall Street's evolving perspective of the business.
Is Palantir overpriced?
With a market cap approaching $150 billion and a price-to-sales ratio of 52.8, Palantir's stock appears overpriced based on traditional metrics.
However, this doesn't signify that Palantir doesn't have a promising future ahead. It will simply take some time for the business to develop into its current valuation. Investors should refrain from expecting the stock's remarkable gains to persist, and a prolonged downturn at this stage would not come as a shock.
Despite Palantir's impressive performance, some investors might be seeking to take profits, leading to a need for finance to fund their money withdrawal from the market. With the potential for market corrections, it may be prudent for investors considering investing in Palantir to conduct thorough research on its long-term financial prospects.
