Palantir’s Stock Decline Amid Analyst Concerns
Palantir’s stock saw a decrease of 7% on Tuesday, largely due to Wall Street analysts voicing doubts about the company’s significant valuation. Notably, investor Michael Burry, known for his short positions, revealed his own stake against the firm.
In a discussion on CNBC’s “Squawk Box,” CEO Alex Karp criticized short sellers, labeling their actions as “market manipulation.” He referred to these positions as “highly inducing,” arguing they undermine a reputable company.
“Honestly, I think what’s happening here is market manipulation,” Karp stated. He emphasized that the company had delivered impressive results, perhaps some of the best ever seen.
This recent stock movement overshadowed the company’s robust earnings and optimistic guidance. For the second consecutive quarter, sales surpassed $1 billion, prompting Palantir to enhance its projections for the year.
Goldman Sachs analyst Gabriela Borges noted that the stock’s after-hours response was muted, likely influenced by the high expectations set after last quarter’s sales exceeding predictions by 7% and a remarkable year-to-date performance of 175%.
These results coincided with a wider market reevaluation as concerns about a potential artificial intelligence bubble surfaced. Analysts have long been worried about Palantir’s skyrocketing valuation compared to established tech giants that are consistently profitable. To justify this valuation, many believe the company must continue elevating its guidance significantly.
Currently, Palantir’s forward price-to-earnings ratio stands at a staggering 254 times, while Nvidia, for example, maintains a forward P/E of 35x.
Jefferies analyst Brent Till expressed enthusiasm for Palantir but suggested the risk-reward scenario appears more favorable elsewhere, such as with Microsoft and Snowflake. Additionally, Mizuho analysts remarked that despite a strong quarter, the risk-reward analysis faces “major challenges.” Similarly, DA Davidson’s Gil Luria reiterated a neutral stance due to valuation worries and noted that Palantir is continuously raising its expectations.
RBC analysts commented on Palantir’s execution in AI commercialization, mentioning that while growth is somewhat supported by demand in the U.S. market and increased spending in AI transformations, the overall outlook remains cautious.
