Palantir stock drops 7% on valuation concerns, Karp accuses short sellers of 'market manipulation'

Palantir Technologies experienced a significant 7% drop in its stock price on Tuesday, driven by rising concerns from Wall Street analysts regarding the company's high valuation. This decline coincided with the revelation that investor Michael Burry, known for his role in 'The Big Short,' has taken a short position against the software firm. In a heated interview on CNBC's 'Squawk Box,' Palantir's CEO Alex Karp vehemently criticized short sellers, accusing them of engaging in what he termed 'market manipulation.' He described their actions as 'super triggering' and emphasized that they were targeting 'one of the great businesses of the world.' Karp asserted, 'Honestly, I think what is going on here is market manipulation. We delivered the best results anyone has ever seen.' This stock movement overshadowed Palantir's impressive financial performance, which included beating both top and bottom-line expectations and providing stronger-than-anticipated guidance. The company reported revenues exceeding $1 billion for the second consecutive quarter and raised its full-year outlook. Goldman Sachs analyst Gabriela Borges noted that the muted stock reaction following these results must be viewed in the context of high expectations, especially considering that Palantir had previously outperformed revenue projections by 7% last quarter and has seen a remarkable 175% increase year-to-date. Compounding the situation, analysts have expressed ongoing concerns about Palantir's valuation, which is notably higher than that of larger tech firms with more substantial revenues. To justify its elevated price-to-earnings ratio, currently at an astonishing 254, investors are looking for continued significant guidance increases. In comparison, Nvidia, the world’s most valuable company, has a forward P/E ratio of just 35. Jefferies analyst Brent Thill, while acknowledging their positive stance on Palantir, indicated that the risk-reward scenario appears more favorable for other AI software companies like Microsoft and Snowflake. Mizuho analysts also pointed out that despite another strong quarter, the risk-reward dynamics present a considerable challenge. D.A. Davidson's Gil Luria reiterated a neutral rating, voicing concerns about valuation and stating that Palantir is 'raising the bar even higher.' Overall, RBC analysts acknowledged Palantir's ongoing execution in AIP commercialization but cautioned that growth seems primarily supported by U.S. enterprise demand and accelerated spending on AI transformation.