After stock markets slammed software stocks in the first half of 2021, not all of them are rebounding. Palantir (NYSE:PLTR), which reports quarterly results on May 11 before the market opens, lost 14% in the last week alone. Why is the stock tanking?
The short-float on Palantir stock is under 4%, so the bears do not get credit for the drop. Investors who noticed the negative 65.9% insider transactions (selling) are bailing.
Palantir is a tech stock favorite on Reddit’s WallStreetBets. ARK Invest, an actively managed exchange-traded fund, buys the stock regularly.
That does not mean retail investors should follow. Insiders deserve some compensation post-IPO for their work. The share lock-up expires, allowing them to book some gains before they are gone.
Bulls regularly call Palantir’s revenue a long tail, comparing it to Facebook. While its near-term contracts are paltry in size, the total revenue over the next decade with government clients and healthcare customers is enormous.
At almost 35 times sales, PLTR stock is at risk of falling post-earnings. Last quarter, the company booked so much stock-based compensation that it posted a loss. Plus, growth hardly rose. The company cannot afford to repeat the quarter with weak results.
If Palantir disappoints, track the stock and consider buying it, eventually. For now, the stock remains a strong prospect for patient investors.
