- Palantir reported strong earnings beat but Jefferies says the stock is poised to drop.
- The bank's thesis is similar to that of famed investor Michael Burry, who has shorted the stock.
- The Wall Street bank cited concerns about Palantir's valuation and exposure to changes in the AI narrative.
Palantir Technologies delivered a big earnings beat on Monday, but Jefferies says the stock is poised to drop.
The bank responded to the company's earnings, which showed 85% revenue growth in the first quarter, with a bearish forecast that evoked views that are in-line with famed investor Michael Burry.
"I would argue this is not just overvaluation. I am shorting the business model. I am shorting the entire premise upon which the company rests. I am shorting the CEO," Burry said ahead of the earnings release on Monday.
Following the report, he noted that Jefferies downgrade of Palantir stock to "underweight" sounded a lot like his own thesis.
"I saw Jefferies initiated with a price target of $70, and cited my thesis. Well, the analyst did not cite me, but the words sounded familiar."
The bank cited Palantir's high valuation and limited growth potential. Analyst Brent Thill slashed the firm's price target for the stock to $70, a 46% drop from current levels.
In his note, Thill shared concerns about its ability to continue scaling and demonstrating sustainable growth.
"PLTR has now delivered 11 consecutive quarters of growth acceleration, which is impressive but also makes the setup increasingly difficult," Thill stated. "The key debate from here is not whether demand is strong, but whether growth can keep accelerating off a much larger base and increasingly difficult comps."
Other prominent voices in the investing space, such as short-seller Andrew Left and economist Jay Ritter have revealed bets against Palantir, both on the grounds that the stock is overvalued.
While Thill described Palantir's fundamentals as "exceptional," he added that they don't outweigh the pressing valuation concerns that his team sees. The stock currently trades at 31 times its expected revenue for the 2027 year, which Thill thinks can only be justified through a "heroic durability assumption."
He also doesn't think Palantir stock can withstand further volatility stemming from any change in attitudes toward AI among investors.
"We believe PLTR remains vulnerable to any moderation in AI enthusiasm or even modest headline deceleration," he noted.
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