Cathie Wood, CEO and Chief Investment Officer of Ark Investment Management (ARKK), has drawn attention after offloading $17 million worth of Palantir (NASDAQ: PLTR) stock in the first week of January 2025.
The sale, which saw Wood’s ARK Funds unload 221,950 shares between January 3 and January 7, comes as concerns mount over Palantir’s lofty valuation following its sharp rally in 2024.
Despite trimming the position, Palantir remains a major holding in the ARK Innovation ETF, accounting for 5.7% of the fund’s portfolio, according to data from StockCircle.
Picks for you
The stock, however, has struggled in early 2025. As of the market close on January 10, Palantir stocks were trading at $67.26, reflecting a five-day loss of 10%. In premarket trading on January 13, the stock continued its decline, down an additional 4.16%.
Consistent trimming by Cathie Wood
Wood’s latest sale follows a pattern of consistent trimming in December 2024, when ARK Funds sold significant portions of Palantir shares.
On December 6, Wood’s fund sold 95,570 shares worth $7.3 million. Later, on December 19, 33,402 shares were sold for $2.5 million, followed by another 168,510 shares between December 23 and 26, valued at $13.8 million.
These sales, coupled with aggressive insider selling by Palantir executives, including CEO Alex Karp, have raised concerns about the stock’s elevated valuation.
For instance, Karp alone sold over $1.2 billion worth of shares in late 2024, while Chairman Peter Thiel offloaded over $1 billion during the same period.
More recently, insider Ryan D. Taylor executed a major transaction, selling 483,987 shares and earning approximately $36.05 million from the sale as reported by Finbold.
Palantir’s strong growth prospects
Despite the recent pullback, Palantir was one of Nasdaq’s best performers in 2024, with its stock soaring an impressive 365% over the year.
The rally was fueled by robust demand for its AI-powered data analytics solutions and its inclusion in the S&P 500 Index, which boosted investor sentiment.
Palantir’s AI Platform (AIP) played a crucial role in driving growth, with its commercial revenue in the U.S. segment surging 54% year-over-year during Q3 2024. The government segment also posted robust results, with revenue increasing by 40% over the same period.
The company’s success is driven by its ability to secure significant contracts, including 104 deals worth over $1 million each in Q3 2024, boosting its total contract value (TCV) to $1.1 billion.
Palantir’s strong operating margins, which improved to 38% in Q3 from 29% a year earlier, further highlights its robust financial health. Moreover, with $4.6 billion in cash and no debt as of Q3 2024, the company has the flexibility to invest in growth opportunities, pursue acquisitions, and innovate further.
Valuation concerns loom large
While Palantir’s growth prospects are compelling, its valuation has raised concerns. The stock currently trades at a price-to-sales (P/S) ratio of 56.44x and a forward price-to-earnings (P/E) ratio of 146.15x, far exceeding industry averages, according to data from StockAnalysis.
Morgan Stanley (NYSE: MS) recently downgraded the stock to ‘Underweight,’ with a price target of $60.
Analyst Sanjit Singh highlighted that Palantir’s current market price already factors in an ambitious 10-year growth trajectory with a 30% compound annual growth rate (CAGR) and 41% free cash flow (FCF) margins—figures that may prove challenging to achieve.
While Palantir’s long-term growth prospects remain promising, its sharp rally has made it vulnerable to heightened volatility.
For investors, the potential for further upside must be carefully weighed against the risk of a significant pullback, particularly if the company’s performance fails to meet its ambitious growth expectations.
Featured image via Shutterstock
