Shares of Palantir Technologies (PLTR) are surging in today’s trading to new record highs after the big data analytics company announced that it will switch its listing from the New York Stock Exchange (ICE) to the Nasdaq (NDAQ) on November 26. The firm also expects to become eligible for inclusion in the Nasdaq 100 index (QQQ), which would lead to increased buying from funds tracking the benchmark.
Interestingly, Palantir’s recent inclusion into the S&P 500 index (SPY) was also viewed as a positive catalyst for the share price and it seems like management wants to build on this momentum. Indeed, Palantir has seen its shares soar 272% on a year-to-date basis and a roughly 50% jump since its Q3 earnings report, which included an increase in revenue guidance.
However, it is worth noting that being included in stock market indices is not a fundamental catalyst that improves the underlying operation. And the more the price rises due to market mechanics rather than revenue and earnings growth, the more unsustainable the rally becomes as a result of growing valuation concerns.
Analysts Are Concerned with the Valuation
Unsurprisingly, analysts are concerned with Palantir’s valuation. Indeed, according to TipRanks’ Bulls Say, Bears Say tool, Palantir is considered the most expensive software company. Therefore, they think that the current price is unsustainable. In addition, bearish analysts pointed out that CEO Alex Karp has sold more than $1.2 billion worth of stock in the past three months.
This could suggest that he is looking to cash in on his holdings and drive up the share price as much as possible in the meantime, especially since share price gains from being included in the Nasdaq 100 index would be purely based on market mechanics that force passive index funds to buy PLTR shares. To further add to the speculation, the value of Karp’s PLTR stock is now $380 million – significantly less than the amount he has sold off.
Is PLTR a Good Stock to Buy?
Overall, analysts have a Hold consensus rating on PLTR stock based on three Buys, seven Holds, and six Sells assigned in the past three months, as indicated by the graphic below. In addition, the average PLTR price target of $33.73 per share implies 46.8% downside risk.
