More signs of Palantir’s (NYSE:PLTR) lack of strength in the commercial sector are emerging, while the recent deals announced by the company have not been very impressive. Moreover, the company’s executives have recently sold tens of millions of shares of PLTR stock.
In light of these points, I continue to remain very bearish on the outlook of Palantir.
In a note to investors earlier this month, Melius Research analyst Carter Copeland reported that Palantir was having success in the commercial side of its business, but that growth was slower than analyst expectations.
Also worrisome for the owners of PLTR stock, the analyst said that most of the company’s new deals last year came from existing customers.
“New customer growth is what will ultimately be required to show the commercial momentum the market wants to see longer term,” Copeland wrote. “In this regard, the data is still mixed.”
Over the last six months, I’ve warned several times that Palantir’s revenue from its commercial customers in the fourth quarter only increased 4% year-over-year.
In light of Copeland’s statements and the anemic growth 0f Palantir’s commercial revenue in Q4, I remain skeptical as to whether the company has meaningful comparative advantages over other data analysis software vendors that also utilize artificial intelligence.
A Closer Look at PLTR Stock
Multiple Palantir executives have been selling huge amounts of the company’s shares.
CEO and co-founder, Alex Karp, unloaded $10.4 million of the company’s stock a few weeks ago for $21.55-$23.54 per share.
Barron’s blamed the sale on Karp’s need to pay taxes on “the vesting of certain restricted stock units.” However, I can’t help but believe that Karp would have found a way to hang onto the majority of those shares if he really thought they were going to zoom higher.
Another Palantir co-founder, Stephen Cohen, has sold over $57.5 million of the company’s shares in recent months, while its general counsel, Matthew Long, unloaded over $21 million and its chief legal and business affairs officer, Ryan Taylor, dumped $10 million of the stock.
Palantir’s COO, Shyam Sankar, parted with $21.5 million of Palantir’s shares.
In recent weeks, I have not been very impressed with the new contracts announced by Palantir.
The company said that it had launched a strategic partnership with one medium-sized company —Faurecia (OTCPK:FURCF), an automotive supply maker and extended an agreement with another medium-size firm, Ringier, a media company, but did not provide any financial data on the deals.
Palantir also announced a contract with the National Nuclear Security Administration that’s worth $89.9 million for up to five years.
Palantir divulged an expansion of an existing agreement with a major company, 3M (NYSE:MMM), but only said that the deal had a multimillion-dollar valuation.
In my opinion, to justify the $42 billion market capitalization of PLTR stock, the company should be announcing major new deals with large companies worth at least $100 million, on a fairly regular basis. It should also be unveiling multiple new government deals worth at least $100 million as well.
The Bottom Line on PLTR Stock
There’s more evidence that Palantir’s commercial business is not growing very quickly, while insiders’ decision to sell millions of their shares is not encouraging.
Finally, none of the deals announced by Palantir in the last two months is very impressive.
Meanwhile, despite the pullbacks of PLTR stock in recent weeks, the shares are still trading at a very large price-sales ratio of 21. In light of all of these points, I continue to recommend that investors sell the company’s shares.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Larry Ramer has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.