A Clash of Titans: Divergent Views on Palantir’s Valuation

The investment community is witnessing a stark divide over data analytics firm Palantir. On one side stands Michael Burry, the investor famed for his prescient bet against the U.S. housing market before the 2008 crisis. Regulatory filings reveal his hedge fund, Scion Asset Management, has established a substantial short position against the company. This involves purchasing put options worth approximately $9.2 million, which represent a notional value of about $912 million. These options carry a strike price of $50 and expire in 2027, signaling Burry's conviction that the stock's current premium valuation is unsustainable.

In direct opposition, Bank of America maintains a bullish outlook. Analyst Mariana Perez Mora has reaffirmed a "Buy" rating, setting a price target of $255 per share. This projection implies a potential upside of 32% from recent levels. The bank's optimism is rooted in Palantir's entrenched position within the U.S. defense sector and the rapid adoption of its Artificial Intelligence Platform (AIP). Key contract wins, such as a $448 million deal with the U.S. Navy for its "Ship OS" system and an extension with France's domestic intelligence agency, the DGSI, are cited as fundamental strengths.

Palantir's operational momentum is undeniable, as demonstrated by its third-quarter results for fiscal 2025. Revenue surged 63% year-over-year to $1.18 billion. Its U.S. commercial business was a particular standout, exploding by 121% to $397 million. The company also generated $540 million in free cash flow, achieving a robust margin close to 50%. Furthermore, its remaining performance obligation, a measure of secured future revenue, skyrocketed 151% to $2.76 billion.

Should investors sell immediately? Or is it worth buying Palantir?

Despite this hypergrowth, the core debate centers on valuation metrics. The stock trades at a price-to-earnings ratio exceeding 450. Looking ahead, its forward free cash flow multiple for 2026 sits near 120, leaving little room for operational missteps. For context, even Nvidia—a company also commanding a premium valuation—trades at significantly lower multiples. This disparity raises a critical question for investors: do software margins genuinely justify a higher valuation multiple than the hardware infrastructure enabling the AI revolution?

Technical Position and Market Sentiment

From a chart perspective, Palantir's shares remain in a strong technical posture. The stock price is trading well above its key moving averages, specifically the 50-day average at $179.94 and the 200-day average at $146.94. The psychologically significant $200 level appears within reach. However, a survey of analyst sentiment reveals caution. The consensus average price target is just $172.28, roughly 11% below the current price of $193.38, which was established after a 4.2% gain last Friday. Approximately 63% of covering analysts currently recommend a "Hold" stance.

The upcoming release of fourth-quarter earnings is anticipated to provide greater clarity. Revenue guidance is projected to be between $1.33 and $1.34 billion. Additionally, further details on the "Chain Reaction" platform, developed in collaboration with Nvidia, could serve as a potential catalyst. Until then, Palantir remains a battleground stock, embodying a fundamental clash between growth trajectory skeptics and believers.