Palantir Stock Drops 9%: Analyzing Morgan Stanley's Critical Report

This article was edited by Andrew Salamon, head of content at Daily Palantir. You can follow him on twitter/x here

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Shares of the data analytics giant, Palantir, slid sizeably by 9% within just three hours of the market's opening. The culprit? A provocative 21-page report by Morgan Stanley that critiques the company's valuation and potential for growth. For those acquainted with the stock market's erratic behavior, this might seem like a déjà vu of Wall Street's notorious antics.

Just a few years ago, between 2019 to 2021, many investors were navigating the market's unpredictable terrain, often without a clear roadmap. And yet, each time Wall Street presents one of these dramatic turns, it ignites a frenzy of speculation and wonder.

Today's focus is Palantir, whose stock tumbled from $16.35 to $14.80 by 12:30 PM Eastern Standard Time. This decline, amounting to 9.34%, came hot on the heels of Morgan Stanley's scathing report. The financial services company argued that Palantir's stocks were not only overvalued but also hyped beyond their actual worth. Their report suggests that Palantir's correct valuation is around $9, a significant drop from the current market price.

Analyzing Morgan Stanley’s Report

For starters, they are skeptical about Palantir's latest product, their AIP (Artificial Intelligence Platform), seeing it more as a theoretical concept than a tangible, revenue-generating asset. The report underscores a notable disparity between the hype surrounding Palantir's AI-driven vision and the company's financial fundamentals. While Palantir's valuation has skyrocketed by over 180% in the past eight months, its concrete strategies to monetize this growth remain ambiguous.

However, it's not all gloom and doom. Morgan Stanley does recognize potential areas where their predictions could fall short. If Palantir manages to hasten its AIP monetization timelines or secures significant governmental contracts, it could potentially offset some of the bearish perspectives. The prospective inclusion of Palantir in the S&P 500 and a potentially lucrative contract with the NHS in the UK could serve as pivotal turning points for the company.

But even these potential bullish scenarios come with caveats. The report suggests that these advancements, even if achieved, might not be substantial enough to justify the current stock valuations, especially if Palantir fails to demonstrate tangible revenue growth.

An intriguing facet of Morgan Stanley's report lays out various scenarios: bear, base, and bull cases. The bull case, painting a rosy picture, imagines a world where Palantir sees a growth rate of 30% over the next five years, accumulating a revenue of $9.1 billion by 2028. The base case, on the other hand, is more conservative with a 19% growth rate and $5.3 billion in revenue by 2028. The bear case, the most pessimistic of the lot, predicts a mere 11% growth, culminating in revenues of $3.6 billion by 2028.

These projections and analyses undoubtedly make for an intriguing read. But as with all stock market forecasts, only time will unveil the real trajectory of Palantir's fortunes. For now, investors are bound to stay on their toes, closely watching the unfolding drama between Wall Street heavyweights and tech giants.

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