After defying gravity for much of the past few years, Palantir Technologies (PLTR +1.25%) is finally coming back to earth, with the stock falling as much as 6.7% on Thursday. As of 2:00 p.m. ET, the stock was still down 5%.
The catalyst that sent the data mining and artificial intelligence (AI) specialist lower was a bearish prediction by a well-known investor.
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The Big Short
Investor Michael Burry gained fame by famously betting against the housing market in 2008, banking $100 million for himself and $725 million for investors. The movie depicting these events, The Big Short, has become Wall Street canon. Now, the investing icon has set his sights on Palantir.
In a 10,000-word short thesis released today, Burry took issue with Palantir, suggesting the stock could fall as much as 66% from its current price, to about $46 per share. While he provided several possible scenarios with outcomes ranging from $21 to $146 per share, his take was decidedly bearish: "I believe Palantir's recent winning streak will not endure."
Not everyone agrees with Burry's assessment. Analysts at D.A. Davidson reaffirmed their neutral rating and $180 price target on Palantir. The analysts said, "We read all 10,000 words in Michael Burry's newsletter and found no new reason to worry about Palantir."
NASDAQ: PLTR
Key Data Points
They went on to point out that Burry's post contained "no new evidence or argument" that would change their view of the company. Despite Palantir being "expensive," the analysts cite the company's accelerating growth and strong cash flow margins as evidence that Burry's critique is flawed.
"Why is Palantir growing so much faster than any other software company at scale?" the analysts asked. "How is it accelerating if it is not adding value? How is it doing so with high cash flow margins?"
At 202 times earnings, Palantir stock is undoubtedly expensive, but as I have argued before, it may be the rare stock that can live up to its pricey valuation.
Nothing new to see here, folks.
