Palantir Sees Millions of Dollars in Bearish Option Trades as Stock Tumbles
$Palantir Technologies Inc.(PLTR)$
Morgan Stanley analysts led by Sanjit Singh gave the stock an underweight rating and a price target of $60, implying a 25% downward potential from Friday's close. While they noted that Palantir has won the early rounds of the race to capture demand driven by artificial intelligence, they noted that the "valuation premium negative skews risk/reward."
"In the past 18 months, Palantir has driven better-than-expected U.S. commercial traction, U.S. government deal momentum, and OpEx discipline," the analysts wrote in a note Monday. OpEx refers to operating expenses. "However, this is well reflected in shares."
While shares tumbled 5.7% to $75.36 Monday, they're still up 352% from a year earlier. That surge means Palantir now trades at almost 361 times earnings, pricier than $NVIDIA Corp(NVDA)$
The biggest of the bearish block trades involved an active buyer paying a $4.45 million premium for put options that give the holders the right to sell 700,000 Palantir shares at $72.50 each by Feb. 21. The contract price jumped 24% as the stock price declines, boosting the odds that option would be in the money before it expires.
The second largest block trade involving Palantir was posted at 10:19:10 a.m. An active seller collected a $1.6 million premium for issuing call options that give their holders the right to buy a combined 155,000 Palantir shares at $120 each by Jan. 16, 2026. The 1,550 contracts, each covering 100 shares, were sold at $10.35 a share. The call options would expire worthless should Palantir shares continue to trade below that strike price of $120 in 375 days.
To put things in context, Nvidia, the most popular stock option, has seen revenue climb 94% in its latest quarter, more than triple the pace of gains for Palantir. And yet the stock of the dominant player in powerful chips behind artificial intelligence (AI) applications is only trading at 51.5 times future earnings, a lower multiple compared to Palantir's 198 times.
That might explain analysts' average price target on Palantir of $46.39, implying a 39% downward potential. That gap between the stock price and the target price is near the widest it's ever been.
Monday's decline took the share price below the middle line of the Bollinger Band, a sign to some who study charts that the stock could be headed for the lower line of that band, and the trend may be bearish.
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