Palantir Stock: Buy, Sell, or Hold?

Palantir's (NYSE: PLTR) share price has spiked recently, rising more than 220% over the past 12 months. Investors are optimistic about the company's growth in the artificial intelligence (AI) market, as its analytics software helps companies and government agencies make sense of their vast quantities of data.

But Palantir's soaring share price has no doubt left many investors wondering if they should sell the stock to lock in their gains, continue holding, or even buy shares. Here are a few suggestions.

The case for selling Palantir

If you're considering selling your Palantir stock, you should ask yourself a few questions first. Consider these good reasons to sell a stock:

• The investment thesis for the company has changed.
• The company is being acquired and its share price already reflects most of the value of the bid price.
• You need the money.
• You need to rebalance your portfolio.

Considering that nothing drastic has changed about Palantir's business and that the artificial intelligence market remains healthy, if you hold the stock, it's unlikely your initial reasons for buying it have ceased to apply. There's also no news suggesting that Palantir is the target of acquisition interest.

Still, there's nothing wrong with taking your large Palantir gains right now if you need the money for something else, like buying a new house or another large expense. What's more, if Palantir now makes up too much of your overall portfolio's value, you may want to sell some shares to rebalance it.

The case for holding Palantir

If you already own Palantir, you're likely trying to decide whether the stock has more room to run. While there's no way to know for sure, the company's impressive growth is an indicator that it's still on the right track.

Palantir's revenue increased 30% in the third quarter to $726 million, comfortably ahead of Wall Street's consensus estimate of $701 million. And the company's adjusted earnings per share (EPS) grew 43% from the year-ago quarter to $0.10, beating analysts' consensus estimate of $0.09.

Image source: Getty Images.

The company also grew its customer count by an impressive 39% and closed 104 deals worth $1 million or more.

In short, Palantir's business is doing well and nothing fundamentally changed with the company that should give investors pause. All of this means that holding onto your Palantir shares is probably a good strategy right now.

Is there a case for buying Palantir?

I'll admit that I think the case for buying Palantir right now is pretty weak. Not because it isn't a good company but because its stock is so expensive.

The shares have a price-to-earnings ratio of 328 as of this writing. That's a staggering P/E ratio, even for a growth stock in the technology sector. For comparison, the overall tech sector currently has a P/E ratio of about 33.

If there's a pullback in the company's share price, that might create a buying opportunity for investors. But as it stands right now, Palantir's stock is too expensive to buy.

Final verdict

I think if you own Palantir's stock, you should hold onto your shares unless you really need the money for something else or want to rebalance your portfolio.

However, even if you want to buy Palantir's stock, it's probably best not to right now, considering its lofty valuation. The company offers an impressive opportunity in the AI space, but it's priced for perfection.

Should you invest $1,000 in Palantir Technologies right now?

Before you buy stock in Palantir Technologies, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $858,854!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of November 18, 2024

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.