## Double the Fortune: Palantir’s Stock Surge in 2024
**Palantir Technologies (NYSE: PLTR)** has been riding a wave of success in 2024, with its share prices nearly doubling since the start of the year. This surge has captured the attention of investors and tech enthusiasts alike. However, this boom also coincides with news that co-founder and Chairman Peter Thiel is planning to sell a significant portion of his shares, valued at nearly $1 billion. Thiel’s move has prompted a pivotal question for investors: Should they follow his lead and cash in on their Palantir holdings? Let’s dive deep into the factors at play and explore the complexities behind this decision.
### The Mechanism: Understanding Rule 10b5-1 Selling Plans
To understand Thiel’s decision, we need to decode the **Rule 10b5-1 plan**. This SEC rule allows company insiders to sell shares based on predetermined instructions, protecting them from accusations of insider trading. Here’s how it all breaks down:
- **Predetermined Instructions**: Insiders provide a brokerage with instructions about when to sell their shares, often based on stock prices or specific dates.
- **Cooling-off Period**: Following the plan’s establishment, there’s a mandatory waiting period before any trades can occur.
- **Public Disclosure**: Some parts of the plan are disclosed publicly to maintain transparency.
Thiel’s latest Rule 10b5-1 plan involves selling approximately 28.6 million shares by the end of 2025. This move follows a previous plan where Thiel sold 20 million shares earlier in the year. As a tech investor, I see this as a savvy tactic to capitalize on the recent spike in stock value without falling afoul of insider trading laws.
### Thiel’s Selling Spree: Locking in Profits
Peter Thiel currently owns around 99.5 million shares of Palantir through various investment vehicles. Through his latest plan, he aims to reduce his holdings by nearly 29%, bringing his total down to 70.9 million shares. It’s not uncommon for company insiders to sell shares after a substantial run-up in price, and Thiel’s actions reflect prudent portfolio management. He’s seizing the opportunity to lock in gains from Palantir’s impressive stock performance, which grew from around $6 at the start of 2023 to around $35 per share now.
### The AI Edge: Palantir’s Shift to Commercial Success
Palantir’s journey from assisting military and intelligence agencies during the War on Terror to becoming a commercial tech juggernaut is a story worth telling. As the company pivots towards commercial markets, it’s tapping into enormous growth potential. Last quarter, Palantir’s commercial revenue soared by 33% to $307 million, driven by its AI-powered platform known as AIP (Artificial Intelligence Platform). AIP allows businesses to leverage large language models (LLMs) to harness the full potential of AI. In simpler terms, Palantir’s AI innovations help companies across various sectors turn complex data into actionable insights, leading to tangible business outcomes.
### Commercial Sector: Fueling the Growth Engine
Palantir’s commercial division isn’t just growing; it’s accelerating. The company’s U.S. commercial revenue grew by an astounding 55% last quarter, with promising forward-looking metrics. For instance, U.S. commercial remaining deal value (RDV) surged by 103% year-over-year, reflecting a strong pipeline of future revenue. CEO Alex Karp’s vision for Palantir extends to creating specialized platforms for different vertical industries. One such initiative is Warp Speed, an AI-powered software designed specifically for modern industrial manufacturing. Warp Speed aims to revolutionize the American manufacturing industry by integrating various enterprise management systems into a cohesive platform.
### Valuation Check: Is Palantir Overpriced?
While Palantir’s achievements are impressive, let’s talk numbers. At a forward price-to-sales (P/S) ratio of over 27.5, Palantir’s stock is in the territory normally reserved for companies experiencing hypergrowth. Yet, Palantir isn’t growing at that blistering pace. Government revenues have been somewhat inconsistent, contributing to an overall growth rate that doesn’t quite justify such a high valuation multiple. As a tech investor, I see Palantir as a remarkable company with groundbreaking technology. But at some point, the company’s valuation must align with its actual growth metrics. Investors should consider this when deciding whether to sell or hold their shares.
### Should You Follow Thiel’s Lead?
So, should investors follow Peter Thiel and cash in on their Palantir gains? Here are some key considerations:
- **Valuation**: The stock’s current high valuation relative to its growth rate suggests that taking some profits could be wise.
- **Future Potential**: Palantir has significant long-term growth potential, especially in the commercial sector and with new AI offerings like AIP and Warp Speed.
- **Risk Management**: Taking some gains off the table could be a prudent way to manage risk, especially if you have substantial profits.
In conclusion, there isn’t a one-size-fits-all answer. Weighing the high valuation against Palantir’s growth prospects and your own risk tolerance is crucial. Thiel’s move offers a good example of strategic profit-taking, but each investor must make their own decision.
### Conclusion: The Palantir Puzzle
Palantir’s transformation into a commercial and AI powerhouse makes it an exciting yet complex investment. The company’s recent growth spurt positions it well for the future, even as current valuations raise some eyebrows. Whether you decide to follow Peter Thiel and sell some of your Palantir shares or hold out for long-term gains, the key is to make an informed decision based on your personal financial situation and risk appetite. As always, stay tuned to the latest updates, and keep an eye on how companies like Palantir continue to shape the future of AI and enterprise technology.