TLDR
- Palantir stock fell 2% Monday after Citron Research expressed caution about the company’s valuation for the second time
- Top investor Julian Lin warns PLTR is in “bubble territory” at 100x sales, comparing it to Cisco’s 30x sales before the 2000 crash
- CEO Alex Karp has sold nearly $2 billion in shares over two years, becoming one of tech’s most aggressive insider sellers
- Despite 450% gains over the past year and crossing $1 billion quarterly revenue milestone, analysts worry valuation is unsustainable
- Wall Street consensus remains neutral with Hold rating and average price target of $154.56 implying 11% downside
Palantir stock dropped 2% Monday morning following fresh valuation concerns from short seller Citron Research. The decline marks the second time the firm has expressed caution about the AI company’s share price.
Citron Research previously suggested Palantir would look attractive at $40 per share. The firm has now backtracked on that position, arguing the stock would remain expensive even at that level.
The short seller’s revised analysis compares Palantir to OpenAI’s valuation metrics. Using OpenAI’s 17x price-to-revenue multiple against Palantir’s projected 2026 revenue of $5.6 billion, Citron calculates a fair value of around $40 per share.
Even at that price point, Citron argues Palantir would rank among the most expensive software-as-a-service stocks. The analysis comes as OpenAI CEO Sam Altman declared the AI market is experiencing bubble conditions.
Altman’s comments carry weight given OpenAI’s $500 billion valuation. His bubble warning has sparked fresh scrutiny of AI-related stock valuations across the sector.
Insider Selling Raises Eyebrows
Citron’s report highlights concerning insider trading patterns at Palantir. CEO Alex Karp has sold nearly $2 billion worth of company shares over the past two years.
This selling spree makes Karp “one of tech’s most aggressive insider sellers” according to the research firm. The massive stock disposals have occurred during Palantir’s remarkable 450% rally over the past year.
Top investor Julian Lin has joined the chorus of valuation skeptics. Lin, who ranks in the top 1% of TipRanks’ stock analysts, issued a strong sell rating on Palantir shares.
Lin draws parallels between Palantir’s current valuation and the infamous tech bubble of 2000. He points to Cisco’s 30x sales multiple before its dramatic crash during that period.
Palantir recently traded at 100x sales, more than triple Cisco’s pre-crash valuation. Lin warns this extreme multiple puts the stock in “bubble territory” despite strong operational performance.
Revenue Growth Can’t Justify Price
The company recently achieved a major milestone by surpassing $1 billion in quarterly revenue for the first time. U.S. commercial revenue surged 93% year-over-year, showing strong adoption beyond government contracts.
Management raised Q3 revenue guidance to $1.087 billion, representing 50% year-over-year growth. These strong fundamentals have supported the stock’s meteoric rise throughout 2024.
However, Lin argues that even stellar performance cannot justify current valuation levels. He believes the share price already reflects years of future growth expectations.
The investor warns of potential negative catalysts that could trigger a major re-rating. Higher inflation or AI-related job losses could serve as bubble-bursting events.
Lin’s analysis suggests Palantir could face downside risk of up to 80% from current levels. He emphasizes that “history has proven time and time again that valuations always end up mattering.”
Citron Research also questions Palantir’s competitive positioning against established players. The firm highlights challenges from Microsoft and Databricks in the enterprise software space.
Wall Street’s consensus view reflects growing caution about the stock. Analysts currently maintain a Hold rating with 13 Hold recommendations, 5 Buys, and 2 Sells.
The average 12-month price target stands at $154.56, implying roughly 11% downside from recent trading levels.
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