"Targeted for Overvaluation, Yet Palantir Surges 30%...Short Sellers Lose $3 Billion in a Day"
Stock Soars on Strong Q2 Earnings
Short Sellers’ 2024 Gains Wiped Out
Palantir's stock price surged, resulting in short sellers recording losses of 3 billion dollars (approximately 4 trillion won) in a single day. Palantir has long been a primary target for short sellers, as ongoing debates have surrounded its high valuation and whether it is overvalued.
On the 4th (local time), Bloomberg reported, citing financial data firm S3 Partners, that Palantir's share price jumped nearly 30%, leading short sellers to incur mark-to-market losses of about 3 billion dollars. These short sellers had previously gained around 2.7 billion dollars in mark-to-market profits since the start of the year, as Palantir's stock recorded a lackluster performance up until the previous day's closing price.
The sharp rise in the stock price was driven by robust earnings and upward revisions to annual guidance. Palantir announced the previous day that its second-quarter revenue soared 93% year-on-year to 1.935 billion dollars. This figure exceeded the market consensus of 1.8 billion dollars compiled by market research firm LSEG. Adjusted earnings per share (EPS) reached 41 cents, beating the market's expectation of 35 cents. The company's annual revenue forecast was also raised from the previous range of 7.65 billion to 7.662 billion dollars to between 8.15 billion and 8.158 billion dollars.
However, Bloomberg noted that some analysts remain cautious, citing Palantir's excessively high valuation. The company's forward price-to-earnings ratio (PER) exceeds 83, implying a significant premium over the broader market.
Brent Thill, an analyst at investment bank Jefferies, expressed a positive view on Palantir's business competitiveness, but assessed that further upside is limited at the current stock price level. Jefferies maintained a 'Underperform' investment rating, analyzing that risk-adjusted expected returns appear better for other artificial intelligence (AI) beneficiaries such as Microsoft, Amazon, and Snowflake. Such ongoing concerns over overvaluation have been one of the reasons short sellers have bet on a decline in Palantir's stock price.
However, remarks from Palantir CEO Alex Karp, stating that demand from companies for the company's data analytics tools is "beyond imagination," helped to somewhat ease investor concerns. Investors had previously worried that tools developed by AI firms such as Anthropic could encroach on Palantir's software business.
The upward revision of annual earnings guidance has further bolstered Wall Street's optimism on Palantir. According to Bloomberg data, approximately 70% of analysts covering Palantir now have a 'Buy' rating on the stock.
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Brad Zelnick, an analyst at Deutsche Bank, evaluated that Palantir once again posted results exceeding market expectations and even raised its guidance, making the high valuation justifiable. Zelnick upgraded his investment rating from 'Hold' to 'Buy' and maintained his target price at 200 dollars. He commented, "Palantir is several steps ahead of other software companies when it comes to translating AI demand into real customer value."
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