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The Palantir (NASDAQ:PLTR) share worth pushed up, hovered round parity, and finally pushed down in after-hours buying and selling on Monday 3 November.
The share worth motion adopted the corporate’s third-quarter earnings. The corporate impressively beat expectations, however clearly not by sufficient to impress the market — that is bizarre phenomenon that has change into extra frequent because the AI growth.
To be exact, Palantir reported third-quarter earnings per share (EPS) of $0.21, beating estimates by $0.04, on income of $1.18bn — up 62.6% 12 months over 12 months and $90m forward of expectations.
These are actually good figures. However the market clearly wished extra, though CEO Alex Karp described it as “arguably one of the best outcomes that any software program firm has ever delivered”.
Shares are at present down 8% as I write.
Actually, I feel there’s good motive for it. It’s inconceivable to take a look at the outcomes and never see the disparity between the earnings and the share worth.
The inventory is at present buying and selling round 288 instances ahead earnings. The worth-to-earnings-to-growth (PEG) ratio… 8.1!
The worth-to-earnings ratio is projected to fall to 225.7 in 2026, 160.4 in 2027, and 109 by 2028. This means that earnings might regularly convey its valuation nearer to conventional tech-sector ranges.
Nonetheless, the valuation is sort of fully disconnected from actuality. It’s born out of a perception that Palantir will dominate the information software program sector.
Nevertheless, there actually isn’t any assure that it’s going to. It’s even bought some fairly big opponents to cope with.
A double whammy
It’s additionally come to gentle that Michael Burry — made widespread by the movie The Massive Brief — has taken bearish positions on Palantir in addition to AI darling Nvidia.
That is in accordance with the most recent 13F submitting for Scion Asset Administration. It was made public shortly earlier than Palantir’s third-quarter outcomes.
The fund disclosed ‘put choices’ on 1m shares of Nvidia and 5m shares of Palantir. A brief place — or on this case, shopping for put choices — is basically a wager {that a} inventory’s worth will decline.
Whereas most traders revenue when share costs rise, brief sellers goal to profit after they fall. If the worth drops, the put choice will increase in worth, permitting the holder to promote at a better, pre-agreed worth.
Nevertheless, it’s essential to notice that Burry has been an inconsistent market timer in recent times. A few of his warnings have missed the mark, whereas others have proved insightful in hindsight.
Nonetheless, his shorting exercise carries weight amongst traders. I’d say that is notably essential now, a time when many are asking whether or not they is likely to be shopping for into an AI-fuelled bubble.
So, ought to traders think about shopping for Palantir shares?
Personally, I feel all of us ought to search for safer choices the place the valuation, progress, and profitability knowledge point out a superb enterprise that could possibly be manifestly undervalued.
