Data analytics titan Palantir Technologies (NYSE: PLTR) has been flying in 2024, with the shares rocketing over 118%. But hold your horses – recent insider selling by CEO Alexander Karp has raised a few eyebrows in the City.
So is there trouble around the corner for this tech stock?
Recent sales
According to the latest SEC filings, Karp offloaded a whopping $31m worth of his shares in a three-day selling spree. 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 — insider selling doesn’t always mean the company is in trouble. Karp might just be picking up a fancy new yacht or funding his next big idea. But I always think in this situation it’s worth doing a bit of sleuthing.
Growth accelerating
On the optimistic side of the fence, the company’s growth story is still sizzling hot. Management recently reported a mouth-watering 27% year on year revenue jump in Q2, with total revenue hitting a tasty $678.1m. It’s even raised full-year revenue guidance to $2.746bn.
The business has it’s fingers in all sorts of AI pies, too. Just the other day, it announced an interesting partnership with Wendy’s to sprinkle some artificial intelligence magic on its supply chain. It’s not just about better burgers — this kind of tech could totally revolutionise how businesses operate.
Analysts are drooling over the company too. Wedbush, for instance, has a lofty $38 share price target. That’s the kind of optimism that’d put a spring in any investor’s step.
Risks
But here’s where it gets a bit sticky. The firm’s valuation is getting pretty high. We’re talking a P/E ratio of around 175 times. That’d make even the most optimistic tech bro blush. It’s the kind of number that suggests investors are expecting the company’s software to cure cancer, solve world hunger, and find a way to make British trains run on time – all before teatime.
And while the company’s cosying up to more commercial clients, it’s still got a bit of a government contract habit that might make some investors twitchy. Those big, juicy government deals can be as unpredictable as British weather, which isn’t exactly comforting for the faint-hearted investor.
There’s also the small matter of dilution. Management has been known to hand out stock-based compensation like it’s going out of fashion. 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.
Not one for the faint hearted
So, what’s a Foolish investor to do? Well, for those with an iron stomach for volatility, any dips could be a chance to grab a slice of the pie at a tastier price. But for those who prefer investments with a bit less drama, it might be best to look for companies with more down-to-earth valuations.
Success will depend on whether it can keep churning out those revenue numbers, woo more commercial customers, and stay ahead of the pack. Only time will tell if Karp’s share sale was a savvy move or a sign of trouble.
The company’s impressive numbers this year are certainly worth noting. But so is the increasingly crowded AI and data analytics space. For now, I’ll be watching from the sidelines.
This post was originally published on Motley Fool
