Palantir (PLTR) has surged over 17% amid Middle East tensions, with CEO Alex Karp highlighting the company’s AI-powered defense technology advantage, but the stock’s 240x trailing P/E and 86x price-to-sales multiples are considered excessive even by growth stock standards.
The recent rally appears to have priced in potential government contract wins from escalating geopolitical tensions, while prominent bears like Michael Burry (fair value $46) and Jefferies analyst Brent Thill ($70 target) warn of the valuation.
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Shares of Palantir (NASDAQ:PLTR) are starting to look interesting again, with shares bouncing back in recent weeks amid the war in Iran. Undoubtedly, it makes sense as to why one of the “secret weapons” of defense might be catching such a sudden bid higher. With Palantir’s top boss, Alex Karp, remarking on the edge that its technology is providing to America amid the war, it certainly feels like shares are the go-to defense stock in this new age of AI.
Karp is completely right about the power behind its technology, as tensions rise in the Middle East. Still, I can’t say I’m going to start rushing in and buying the stock now after quite a sizeable move. In my view, the more than 17% surge in the stock already prices in the Iran war, and such a sudden bounce seems to have made one of the market’s priciest stocks that much more expensive.
Whether Michael Burry is unsettled by the recent rebound in shares of Palantir remains the big question. Either way, Burry sees Palantir stock as having a fair value of $46.00, which could entail another steep 70% drop from current levels.
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Of course, predicting (and betting against) such a crash comes with high stakes, especially if things were to further escalate in the war, or if it isn’t so quick to finish. In any case, one thing Palantir stock has proven is that it’s a potentially decent hedge when war drags the recent of the stock market down.
While war worries could keep the latest upswing going strong, I must say that the valuation has me on pause, especially after seeing how low that Burry price target is.
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