Some high-flying tech stocks still look reasonable. Palantir is not one of them.
Shares in the controversial AI and defence technology stock tanked recently, following six consecutive daily declines that saw it lose almost a quarter of its value.
Even after that battering, the $370 billion (€319 billion) company remains astronomically expensive.
Yes, Palantir has some advocates. Wedbush’s high-profile AI bull Dan Ives says it will be a trillion-dollar stock within three years.
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Palantir’s pugilistic chief executive, Alex Karp, too, remains as bullish as ever, saying it could quintuple US revenue in five years.
It will need to, if it wants to persuade the sceptics. In July, Sherwood News asked: “Palantir’s valuation: Just how insane is it?”
A more recent Economist headline suggested Palantir “might be the most overvalued firm of all time”.
Hyperbole? No.
Palantir trades on more than 100 times sales. That’s a 500 per cent premium over other AI peers, says Morningstar, making this “a difficult-to-justify valuation story”.
“Difficult to justify,” is comically understated, but valuation may not matter. Palantir’s recent pummelling merely brought shares back to where they were trading a few weeks earlier.
It didn’t dent the long-term uptrend, with the stock rebounding as soon as it fell to its 50-day moving average. Palantir’s parabolic ascent has been punctuated by sudden drops, but momentum – an important force in markets – remains intact.
The valuation may be insane, but momentum traders aren’t looking for sanity.
