Tech

Morgan Stanley downgrade sends Palantir shares sliding

Key Points
  • Shares of Palantir slid Wednesday after Morgan Stanley downgraded the stock to underweight from equal weight.
  • The firm said the company is trading at a "significant premium" compared with its peers.
  • Its stock more than doubled since it went public Sept. 30.

In this article

A banner featuring the logo of Palantir Technologies (PLTR) is seen at the New York Stock Exchange (NYSE) on the day of their initial public offering (IPO) in Manhattan, New York City, U.S., September 30, 2020.
Andrew Kelly | Reuters

Shares of Palantir closed down more than 12% Wednesday after Morgan Stanley downgraded the stock to underweight from equal weight.

The company's stock slid as much as 17.6% during the day.

The firm said Palantir is trading at a "significant premium" compared with its peers, with its stock more than doubling since it went public Sept. 30.

"With PLTR up 155% since listing with very little change in the fundamental story, the risk/reward paradigm shifts decidedly negative for the shares," Morgan Stanley analysts wrote.

Co-founded in 2003 by tech investors Peter Thiel and Joe Lonsdale, CEO Alex Karp and others, Palantir provides data analytics software and services to government agencies, including the Defense Department, the Food and Drug Administration and the intelligence community. It also sells to companies like aircraft manufacturer Airbus and energy producer BP.

The company last month reported its first earnings announcement since going public. The company said its new contracts in third quarter included a $91 million deal with the Army, a $36 million contract with the National Institutes of Health and a $300 million renewal with an aerospace customer.

"While strong 3Q20 results highlighting sustained momentum in the government vertical, accelerating growth in the enterprise and record margins of +25% represented a slight fundamental uptick versus initial expectations – we believe much of incremental move since 3Q20 results (shares +75% over the past 2.5 weeks) are likely related to factors outside of fundamentals, including strong retail long-interest squeezing strong institutional short-interest," Morgan Stanley analysts wrote.

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