Palantir Technologies Inc. received a big boost this week. On Tuesday, its shares tumbled 15% from recent peaks, finishing the day in correction territory. The decline followed a broader market selloff and was exacerbated by a critical report from Andrew Left’s Citron Research, which has raised concerns about the company’s valuation.
The report from Citron Research labeled Palantir as “detached from fundamentals and analysis,” suggesting that the stock should be priced at $40 based on a comparison with OpenAI’s recent $500 billion valuation. The upshot of these findings has led to a short selling campaign and general scrutiny on Palantir’s stock price. After six consecutive days of intense selling, the price crashed down into bear market territory on Wednesday.
Earlier this month, Palantir shares had surged to record highs, buoyed by the company’s announcement of its first $1 billion revenue quarter, far exceeding Wall Street’s quarterly estimates. In the wake of all this recent volatility, concerns about sustainability have crept up. The analysts point out that Palantir’s forward price-to-earnings ratio is a mind-boggling 193 times. That would imply a valuation that’s extraordinarily high, especially relative to its fellow big tech companies.
Brent Thill of Jeffries made an interesting comment about where we find ourselves today. He said part of this downward pressure is due to a broader tech sector pullback. He pointed to the extreme highs and lows in Palantir’s one-month stock chart, arguing it illustrates the investor uncertainty that is currently at play.
Though it certainly has had a rough few months, Palantir has accomplished a good deal in 2023. It quickly caught fire, joining the likes of the top 10 U.S. tech firms. Today, it boasts the distinction of being one of the country’s 20 most valuable companies. On top of that, Palantir joined the S&P 500 last year, a testimony to its long growth path.
Andrew Left offered his perspective on the current state of affairs, stating, “Karp and his team should be proud. For investors, that’s where discipline kicks in.” He further remarked that “comparison is the enemy of happiness, and when measured against true AI leaders, Palantir’s price already reflects success beyond its fundamentals.”
As analysts continue to monitor Palantir’s stock performance amid these challenges, investors remain cautious about the company’s long-term outlook and its ability to maintain its position in an increasingly competitive market.