DA Davidson has reaffirmed its "NEUTRAL" rating on Palantir Technologies (NYSE:PLTR) after examining the criticisms laid out in Michael Burry’s extensive newsletter. The research house said it discovered "no new evidence or an argument" in the roughly 10,000-word piece that would alter its constructive view of the company’s underlying business, even as it acknowledged that Palantir shares trade at a premium.
Palantir is currently quoted at a price-to-earnings ratio of 201.7 and carries an estimated market capitalization of about $305.5 billion. InvestingPro data cited by the research firm underscores valuation pressure, showing the stock trading well above its Fair Value estimate and marked by high EBITDA and revenue multiples.
Valuation versus fundamentals
DA Davidson’s assessment attempts to strike a balance between acknowledging valuation risk and recognizing operational strength. The firm noted that while it agrees with some of Burry’s broader concerns about the AI investment cycle and the depreciation profile of data center assets, it parts company with his specific criticisms of Palantir’s capacity to deliver client value.
According to DA Davidson, Palantir is "actually helping its clients achieve value from AI in its mission critical systems." The firm pointed to several characteristics it believes underpin Palantir’s success: the company’s ability to integrate disparate customer data, the provision of end-to-end solutions complemented by services, direct engagement with CEOs at customer organizations, and a cohesive mission-driven culture.
Those operational advantages, DA Davidson argued, show up in Palantir’s financial profile. The firm highlighted an 82.4% gross profit margin and 56.2% revenue growth over the most recent twelve-month period as indicators of strong underlying performance. It also pointed to accelerating growth and robust cash flow margins as metrics that, in its view, contradict a purely bearish interpretation.
Analyst revisions and recent quarterly performance
InvestingPro financial data referenced in the review shows that 17 analysts have moved to increase their earnings estimates for the upcoming period. Revenue growth is forecast at 61% for the current fiscal year. DA Davidson nevertheless maintained that institutional investors should exercise caution, given Palantir’s stretched valuation.
On a quarterly basis, Palantir reported fourth-quarter revenue of $1,407 million, representing a 70% year-over-year increase. That revenue figure topped HSBC’s estimate of $1,342 million and the consensus forecast of $1,340 million. The company’s non-GAAP operating profit for the quarter rose to $798 million, a 114% increase from the prior year, and the figure exceeded analyst expectations by roughly 13-14%.
Market reactions among other sell-side firms have varied. HSBC upgraded Palantir from Hold to Buy and raised its price target to $205.00 from $197.00. Deutsche Bank increased its price target to $200.00 from $160.00, but kept a Hold rating, citing concerns about valuation.
Corporate developments and market scrutiny
Beyond financials, Palantir recently extended a multi-year agreement with Airbus to continue supplying technology for the Skywise platform, which is intended to improve efficiency and safety in civil aviation. The company is also reported to be exploring options to expand its Manhattan office footprint, a move consistent with several technology firms increasing their physical presence in New York City.
Despite these indicators of business momentum, Palantir’s stock came under scrutiny after Michael Burry criticized the AI investment cycle - a critique that included companies such as Palantir - raising questions about data center depreciation and current valuations. DA Davidson addressed those criticisms directly, defending Palantir’s client value creation while still flagging valuation as a reason for a neutral rating.
Bottom line
DA Davidson’s reaffirmation leaves the stock in a holding pattern from the perspective of its rating: acknowledgment of strong business metrics and client traction, paired with caution tied to a high valuation reflected in elevated P/E and other multiples. The research firm’s stance signals support for the company’s operational trajectory while advising investors to be mindful of price risk.
For readers seeking deeper quantitative valuation and comparative analysis, reference was made to a Pro Research Report covering this and more than 1,400 other U.S. equities.