Palantir shares fell 8% after beating earnings expectations, as investor Michael Burry's short position and CEO criticism of short sellers reignite valuation concerns.
Palantir delivered what CEO Alex Karp called "the best results everyone, anyone's ever seen," yet the software company's stock still dropped 8% on Tuesday. The decline came as the data analytics firm reported stronger-than-expected third-quarter earnings, topped $1 billion in revenue for a second consecutive quarter, and raised full-year guidance. Yet none of it was enough to overcome a brewing storm of skepticism about whether the company's stock price can be justified by its fundamentals.
The timing of investor Michael Burry's revealed short position added fuel to an already contentious debate. Burry, known for his prescient bet against the housing market in 2008, disclosed that he was betting against Palantir, prompting CEO Karp to lash out during a television interview on CNBC.
Karp called short sellers' moves "market manipulation" and described their positions as "super triggering," arguing they were shorting "one of the great businesses of the world." His combative tone underscored the tension between company leadership and skeptics questioning whether Palantir's valuation can hold.
Community Insights: Wall Street analysts, however, seem less convinced by Karp's argument. The company trades at a forward price-to-earnings ratio of 254, compared to Nvidia's 35, despite Nvidia being the world's most valuable company with far greater revenues. Multiple analysts acknowledged Palantir's strong execution but flagged the risk-reward as unfavorable. Jefferies suggested investors might find better opportunities in other AI software names like Microsoft and Snowflake, while Mizuho called the risk-reward a "big challenge" and D.A. Davidson reiterated a neutral rating citing valuation concerns.
Commenters online have been particularly harsh, with some questioning the company's business practices and characterizing leadership as delusional. The community reaction reflects a deeper divide: those who believe Palantir is executing brilliantly and deserves premium valuation, and those who see an overpriced stock riding an AI bubble.
The debate touches on broader questions about whether short sellers are legitimate market participants or manipulators, and whether companies can sustain astronomical multiples through perpetual guidance beats. This comes at a time when many people are interested in the industry. Those interested can start with the online AI courses before pursuing more formal education.
For investors watching from the sidelines, Palantir's Tuesday stumble offers a case study in how even stellar earnings can disappoint when expectations have climbed too high. The company's challenge now is not just delivering results, but convincing the market that those results justify a valuation that stands apart from nearly every other technology firm. For more coverage, check Yahoo Finance.
