"Coke Addict" Short-Sellers Double Down on Alex Karp as PLTR Inks New Contract with AMZN

If there’s one stock that keeps Wall Street up at night with a bottle of Tums nearby, it’s Palantir. The AI software company has had a record-breaking 2023, up over 250% year-to-date, defying analysts, skeptics, and anyone who dares to short the stock. 

And while some call it the hottest AI play on the market, others argue it’s nothing but an overvalued pipe dream. So what’s driving this love-hate relationship? A sky-high valuation, relentless short-seller drama, and a CEO who isn’t shy about calling them out for being, well, a little too reliant on coke.

Let’s break down the numbers. Palantir’s shares currently trade at 135 times forward earnings. To put that into perspective, the average price-to-earnings ratio for companies in the Nasdaq 100 Index is around 27. Palantir’s valuation isn’t just high (it’s practically living on Mars with Elon). 

It’s the most expensive stock in the S&P 500 based on enterprise value-to-revenue ratio, and that’s saying something in a market where hype can sometimes outpace common sense. Even Jefferies analyst Brent Thill, who knows a thing or two about big tech valuations, gave it the thumbs down, pointing out that for Palantir’s current price to hold, they’d need to grow sales at 40% annually for four years straight (Alex, I’ll take “things that never happened” for $200).

Now, if you’re on the fence about Palantir’s price, you’re in good company (two analysts have downgraded the stock in the last week alone). But nobody’s more fired up than the short sellers. They’ve lost a collective $3.6 billion betting against Palantir this year, and yet, they’re doubling down. Why? Well, in part, it’s because they believe the stock’s high valuation just isn’t sustainable. And maybe, just maybe, they’re a little ticked off by CEO Alex Karp, who recently called them out, saying they "love pulling down great American companies to pay for their coke." Or maybe they’re just seeing all the Palantir Executives selling their shares like hotcakes?

Karp’s comments echo those of Tesla’s Elon Musk, another CEO who’s no fan of short selling. Karp’s message was clear: Palantir isn’t going anywhere, and if short sellers can’t cover their losses, he’s more than happy to let them struggle. “We’ll lead their coke dealers to their homes after they can’t pay their bills,” he joked. It’s an unusual line, but hey, this is a company co-founded by Peter Thiel (between that and Alex’s choice of hairstyle, subtlety isn’t exactly the game here).

(Source: Financial Times)

Part of what’s keeping the stock soaring is Palantir’s deep connections in the public sector. Just this year, they bagged a $178 million contract with the U.S. Army and announced a partnership with Amazon to bring their AI expertise to government agencies. With a projected $60 billion opportunity in AI for defense alone by 2029, Palantir has solidified itself as the go-to tech for big government projects.

And for investors still holding onto their Palantir shares, these partnerships add a level of credibility to the stock. After all, there’s some comfort in knowing that Uncle Sam is willing to keep cutting Palantir big checks. But for every government contract Palantir scores, the valuation skeptics grow louder, arguing that the hype doesn’t justify the price tag (and it’s hard to argue their point).

At the end of the day, Palantir’s success might boil down to whether they can keep delivering results and landing lucrative contracts to justify that monster valuation. While some think the stock has flown too close to the sun, others believe it’s just getting started (looking at you crazy people on reddit). With retail investors rallying behind it and Karp egging on the shorts, it’s clear that Palantir isn’t backing down from a fight anytime soon.

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