Palantir Stock Surges 12% in October Thanks to Investor Interest

Shares of Palantir (PLTR 0.63%) experienced a notable increase of 11.7% in October, according to S&P Global Market Intelligence. This growth occurred even as insider selling activities came to a halt. Investor enthusiasm surrounding the company and anticipation for an upcoming earnings report in November contributed to the robust demand for the stock.

Insider Selling Activity Concludes

In May, Palantir's co-founder, Peter Thiel, undertook a significant sale of over $1 billion worth of shares. Such insider transactions occur under strict regulations dictated by SEC Rule 10b5-1, which allows insiders to sell shares under predetermined conditions, thereby safeguarding them from potential accusations of exploiting non-public information.

Insider selling usually creates a negative impression and may cause a stock's price to fall. A large shareholder reducing their stake can signal a lack of confidence in the company. However, this situation had already been largely absorbed by the market earlier in the year, meaning the selling had less impact on the stock price.

Thiel’s selling activity tapered off in early October after he disposed of over 12 million shares at an average price of $36.85. These trades accounted for a total of $1 billion, ultimately concluding his ability to sell additional shares in the open market for the remainder of the year.

Due to the heightened supply of shares from insider selling, the stock faced downward pressure. Despite this, Palantir's trading volume—which averages over 50 million shares daily—means insider trades represent a smaller fraction of total market activity. The cessation of such supply can provide a boost for stocks that are in high demand. After the abrupt increase caused by Thiel's sales, trading volume returned to a more modest level.

Investors Buy Ahead of Earnings Announcement

During October, analysts' forecasts for Palantir remained largely unchanged, and there were no significant developments in the company’s operations that would alter future revenue expectations. Instead, investors appeared eager to increase their positions before the important earnings report set for November 4.

The buzz surrounding AI stocks may have lessened since its peak, but the leading companies in this domain continue to capture market attention. This enthusiasm likely contributed to positive expectations leading into the earnings announcement.

In its eventual report, Palantir exceeded analysts’ expectations by delivering a remarkable 30% increase in revenue. The company cited strong demand for its services, which further justified the rising interest in its shares in the lead-up to the quarterly results.

The stock's price momentum has been significant as well, with Palantir’s forward P/E ratio climbing from below 60 to nearly 150 over six months. This valuation is quite high even for a company experiencing impressive sales growth of 30%.

Overall, the interplay between insider trading and investor sentiment ahead of earnings has created a favorable environment for Palantir shares in October.

Palantir, Stocks, Earnings