Palantir Joins the S&P 500, But Should You Follow Thiel’s $1 Billion Cash Out?

Let’s kick off this Monday morning by talking about the stocks that have fanbases so dedicated, you’d think they’re on the CEO’s personal payroll. 

You’ve got the Elon Musk fanboys dreaming of their Tesla Mars Edition, and the Apple die-hards who’d probably line up for days to snag a roll of iWipe toilet paper. But there’s another stock that’s got Redditors and YouTubers all fired up—and that’s Palantir (PLTR).

If you’ve been anywhere near WallStreetBets lately, you’ve seen the Palantir hype. Retail investors are riding this stock hard, with “Palantir to the moon” t-shirts practically selling themselves. Meanwhile, Wall Street’s over here still scratching its head. It’s the same crowd that thought only 900,000 people would be using cell phones by 2000 (actual number: 100 million). So yeah, their track record for seeing the future isn’t exactly spotless.

According to Bank of America analysts, Palantir is one of the most misunderstood companies on Wall Street. Mariana Perez Mora and her team think Palantir’s tech has a lot more potential than the big-money suits are giving it credit for. They’ve raised their price target to $50, which would be a 40.5% jump from its recent trading price. And if you’ve been paying attention, Palantir has already doubled in value this year. The latest catalyst? The announcement that Palantir is officially joining the S&P 500 on September 23rd.

This is a major milestone. Being added to the S&P 500 is like getting the official stamp of approval from the market. It opens up opportunities for larger institutional investors to take notice. CEO Alex Karp took the moment to celebrate, pointing out how Palantir has gone from being viewed as some strange outlier to a profitable company that’s now S&P-worthy.

(Source: CNBC)

But while retail investors are celebrating and shouting "To the moon!", Peter Thiel—Palantir’s co-founder and chairman—is making his own moves behind the scenes. Thiel plans to sell up to $1 billion of his shares. Why? Well, it’s all part of his Rule 10b5-1 plan, which he set up months ago to lock in some gains when the conditions are right. 

He’s no stranger to cashing out, either. Just back in May, Thiel sold 13 million shares at an average price of $21.11. And now, with Palantir trading around $35, Thiel’s sitting on some serious profits. The guy knows when to take his chips off the table.

But should you follow Thiel’s lead? Let’s break down the numbers. Palantir’s been on an incredible run—up 62% since May, and over 400% from its lows earlier in 2023 when the stock was sitting around $6. But here’s where it gets tricky. Palantir’s forward price-to-sales (P/S) ratio is 27.5. For context, most high-growth tech stocks are in the 10 to 15 range. Even Alphabet (Google) has a P/S around 7. So, Palantir’s priced like it’s flying to Mars, but the numbers don’t back it up.

Revenue grew 27% last quarter, solid but not enough to justify such a high multiple. Compare that to Snowflake, which saw 50% growth, yet their P/S is around 20. Palantir’s government contracts aren’t much better—they grew 20% last quarter, which is more of a jog than the Usain Bolt sprint you’d expect from a company valued this high.

Wall Street’s split. Bank of America raised their price target to $50, while Morgan Stanley is keeping theirs at $9, citing concerns about Palantir’s uneven growth and reliance on government deals.

(Source: CNBC)

So, should you follow Peter Thiel and lock in some gains? With a P/S of 27.5 and revenue growth of 27%, Palantir’s priced insanely high, but the growth isn’t quite there. Just remember, even the most hyped stocks eventually have to prove their worth. Even Apple toilet paper needs to be soft.

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Stock.News has positions in Apple, Tesla, and Google.