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Palantir (PLTR) shares closed in the red on Monday after Citron Research, a renowned short seller, warned the AI-enabled data analytics firm is trading at a valuation that’s super disconnected from its fundamentals.
AI stocks more broadly were seen under pressure today after Sam Altman, the chief executive officer of OpenAI, said the artificial intelligence market was likely in a bubble, raising concerns that their stretched valuations may not hold up in the long run.
Palantir stock has been a game-changer over the past three years. Versus its price in late 2021, it’s up some 2,400% at the time of writing.
Here’s Why Palantir Stock Is Egregiously Overvalued
According to Citron Research, comparing PLTR valuation with that of OpenAI suggests the former is egregiously overvalued at current levels.
The artificial intelligence giant behind ChatGPT is now worth some $500 billion with revenue estimates pegged at roughly $5.6 billion for 2026. That translates to a price-sales (P/S) multiple of about 17x.
Applying the same multiple on Palantir Technologies would imply a valuation of no more than $40 per share, and even then, PLTR shares would still be in the league of the most expensive software names, the short seller added.
Insiders Have Been Aggressively Selling PLTR Shares
In its latest report, Citron again recommended caution on Palantir shares also because insiders have been selling them rather aggressively over the past 12 months.
Even the company’s chief executive, Alex Karp, has been among the most prolific insider sellers within the tech industry, having unloaded nearly $2 billion worth of PLTR stock over the past two years.
According to Citron Research, the data analytics company faces intense competition from the likes of Databricks and Microsoft (MSFT) in the enterprise market, which may also disrupt its growth trajectory going forward.
Wall Street Recommends Caution in Buying Palantir Shares
While Citron Research is unusually bearish on the high-flying Palantir stock, most Wall Street firms are not really bullish on it either.
According to Barchart, the consensus rating on PLTR shares currently sits at “Hold” only with the mean target of about $156 indicating potential downside of more than 10% from current levels.
