Trump administration has reportedly picked Palantir Technologies Inc. (NASDAQ: PLTR) as its primary data analysis partners.
Shares of the big data analytics firm are inching up further on Friday.
According to The New York Times, this expanded data partnership with the US government stems from the President’s recent executive order aimed at improving inter-agency data sharing.
Including today’s price action, Palantir stock is up a whopping 75% versus its year-to-date low.
Executives including CEO have recently sold Palantir stock
Palantir stock has been a millionaire maker over the past year, and there have even been calls for the Nasdaq-listed firm to eventually hit a market of $1 trillion.
Still, caution is warranted in buying PLTR shares at current levels as the company’s chief executive, Alex Karp, sold a significant amount of them last week.
According to his recent SEC filing, Karp has unloaded over $50 million worth of the AI stock.
Additionally, other top executives, including Shyam Sankar, its chief of technology, and Stephen Cohen, its co-founder and president, have collectively sold nearly $65 million worth of Palantir shares as well.
Together, these sales may indicate that even insiders agree that PLTR stock is overvalued at current levels, which may be a big enough reason for investors to consider pulling out of it.
PLTR shares are egregiously overvalued
Palantir stock is currently going for a forward price-to-earnings multiple of well of 200. That’s massively above even Nvidia, the AI darling itself, that’s trading at a tad above 30 only.
PLTR’s current price-to-sales ratio of about 98 also reflects gross overvaluation.
That said, several experts continue to ignore valuation concerns and recommend owning the stock they believe could benefit significantly from continued momentum in artificial intelligence.
According to David Kudla, the chief executive of Mainstay Capital, for example, the Denver-based firm is “leveraging AI very well, they’re winning the space with AI on counterterrorism.”
Kudla recommends owning PLTR shares here for exposure to the ever-increasing federal demand for AI-focused solutions as well. Meanwhile, the data analytics firm is growing its footprint in the commercial space as well.
Palantir is not growing fast enough to justify its valuation
Despite bullish experts’ commentary, investors should note that Palantir is not growing fast enough to command the aforementioned valuation metrics.
In its latest reported quarter, for example, the Nasdaq-listed firm grew its revenue by 39% only on a year-over-year basis, despite a 71% increase in its commercial segment.
In comparison, Nvidia saw its revenue pop some 69% in Q1 versus the same quarter last year, and yet it’s going for a much more reasonable multiple compared to PLTR shares.
And it’s not like Palantir stock pays a dividend at writing to incentivize sticking to it despite rich valuation either.
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