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Palantir Shorts to Make Money, Says Wolfe Research Analyst

Sam Boughedda
Sam Boughedda trader
Updated 22 Dec 2022

Palantir (NYSE: PLTR) shares are down more than 64% in 2022, but Wolfe Research analyst Alex Zukin believes there can be money made on the short side.

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YOUR CAPITAL IS AT RISK. 81% OF RETAIL CFD ACCOUNTS LOSE MONEY.


In a note to clients on Wednesday, Zukin downgraded the stock to Underperform from Peer Perform, assigning a $4.50 per share price target. 

The analyst pointed to the company’s sales growth decelerating by 30 points while operating margins contracted from the mid-30% range to the mid-teens over the past few years, with free cash flow on a similar trajectory.

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YOUR CAPITAL IS AT RISK. 68% OF RETAIL CFD ACCOUNTS LOSE MONEY

He added that the “lumpiness and unpredictability” of existing government contracts and potential awards “make it difficult to model and have confidence in the business,” Meanwhile, they calculate that Palantir’s commercial business has moved from a mid-20% grower to low double digits as the current product offering is expensive, requires customization, and the general go to market motion is “sub-par,” based on channel checks, argues Zukin.

The Wolfe Research’s estimates are below Street expectations, with the analyst declaring that they see “the opportunity to make money on the short side.”

The firm models Palantir’s total revenue decelerating further, with continued margin degradation in fiscal 2023 as the company continues to invest.

Elsewhere on Wednesday, the UK Ministry of Defence awarded Palantir a £75 million enterprise agreement to support its digital transformation.

“Palantir software will enable the MOD to exploit data at scale and speed to make faster, better decisions across Defence. Building on more than a decade of partnership, the agreement will enable any part of UK Defence to gain access to Palantir software across multiple classifications, wherever and however it can help – turning the MOD’s digital vision into reality at pace,” the company said in a statement.

Guy Williams, Head of UK Defence & National Security at Palantir Technologies UK, said the agreement with the MOD will “accelerate the UK Armed Forces’ journey to become a truly integrated force.”

Palantir closed Wednesday’s session up 3%.


YOUR CAPITAL IS AT RISK. 81% OF RETAIL CFD ACCOUNTS LOSE MONEY.


Sam Boughedda
Sam is a trader and lead stock market writer at AskTraders. After starting his career in the forex market, Sam now focuses on stocks, specifically consumer staples.