TLDR
- Citron Research warned PLTR is overvalued, comparing it unfavorably to OpenAI’s 17x price-sales multiple
- CEO Alex Karp has sold nearly $2 billion in PLTR stock over two years, showing heavy insider selling
- AI market concerns emerged after Sam Altman suggested the sector might be in a bubble
- Analysts raised earnings estimates for PLTR with 70% expected growth in current quarter
- Wall Street consensus remains “Hold” with $156 target price suggesting 10% downside potential
Palantir stock dropped on Monday as Citron Research issued another warning about the data analytics company’s valuation. The short seller’s latest report comes just as analysts continue raising their earnings forecasts for the AI-powered firm.
Citron Research argued that PLTR shares are trading at levels that don’t match the company’s business fundamentals. The warning follows a broader selloff in AI stocks after OpenAI CEO Sam Altman suggested the artificial intelligence market might be experiencing a bubble.
The timing creates an interesting contradiction. While short sellers express caution, Wall Street analysts are becoming more optimistic about Palantir’s earnings potential.
PLTR has delivered massive returns over the past three years. The stock has gained approximately 2,400% since late 2021, making it one of the market’s top performers during this period.
Valuation Concerns Mount
Citron Research used OpenAI as a benchmark to question Palantir’s current valuation. The ChatGPT maker is valued at roughly $500 billion with estimated 2026 revenue of $5.6 billion.
This creates a price-to-sales multiple of about 17x for OpenAI. Applying the same multiple to Palantir would suggest a fair value of no more than $40 per share.
Even at that level, PLTR would still rank among the most expensive software stocks in the market. The comparison highlights how far the stock has stretched beyond traditional valuation metrics.
Citron pointed to intense competition as another concern. Companies like Databricks and Microsoft are battling for the same enterprise customers that Palantir targets.
The short seller believes this competitive pressure could slow Palantir’s growth trajectory. Enterprise customers have more options now than when Palantir first gained prominence in the data analytics space.
Heavy Insider Selling Raises Questions
CEO Alex Karp has been among the most active insider sellers in the technology sector. He has unloaded nearly $2 billion worth of PLTR stock over the past two years.
This level of selling by the company’s top executive raises questions about management’s confidence in the stock price. Insider selling often signals that executives believe shares are fully valued or overvalued.
Other company insiders have also been selling their positions aggressively over the past 12 months. The pattern suggests widespread belief among company leadership that the stock has reached unsustainable levels.
Citron highlighted this insider activity as a red flag for potential investors. When company executives are selling heavily, it often indicates they view current prices as unsustainable.
Despite the warnings, analysts are raising their earnings estimates for Palantir. The company is expected to earn $0.17 per share in the current quarter, representing 70% year-over-year growth.
Six analysts have raised their quarterly estimates over the past 30 days. No analysts have lowered their forecasts during this period, showing strong consensus among Wall Street researchers.
For the full year, PLTR is projected to earn $0.65 per share. This represents a 58.5% increase compared to the previous year, reflecting strong business momentum.
Nine analysts have increased their full-year estimates over the past month. Again, no analysts have reduced their forecasts, indicating broad agreement on the company’s earnings potential.
