It's been a fabulous two days for holders of Palantir Technologies (NYSE:PLTR), with shares of the data analytics company jumping more than 30% since close of business Nov. 4; they're up nearly 20% on Friday afternoon. There isn't any news to explain the move. Rather, the stock move seems to be caused by growing investor interest in this newly public company.
Palantir, a software and data company co-founded by Peter Theil, went public in late September and mostly treaded water in its first month on the New York Stock Exchange. But that has all changed this week, as the stock has soared higher in recent days.
There was some news early in the week, with the United Kingdom reportedly in talks with Palantir about using the company's software to help with its struggling test-and-trace coronavirus program. But that hardly seems like the type of thing that would cause a flood of interest days later.
It appears a lot of the move higher is based on momentum ahead of the company's Nov. 12 earnings release. More than 72 million shares have traded as of 2 p.m. EST on Friday, well above the 42 million share average daily volume during the short time it has been public.
It's hard to know what to make of Palantir as a stock. The company's tech is highly regarded, but its ties to U.S. spy and immigration agencies has made it a target of criticism. Data analytics is a hot sector right now, but with so much of Palantir's revenue tied to government customers, there's an argument to be made it should be valued more like a stodgy defense contractor.
By almost any measure, the stock is not cheap. Palantir said in its registration statement it hopes to generate $1 billion in sales this year, but after Friday's jump it now trades at more than 21 times that sales figure. That's well above the two to three times sales multiples the market usually gives to more traditional government services companies, and even frothy compared with a private-sector data analytics company like Splunk and its 12 times sales multiple.
Palantir has good technology and is selling into a growing market, so it might well grow into that valuation. But for now I'd advise investors to be cautious buying into this rally.