Michael Burry Says Palantir Could Plunge 65%, But The Real Story Is Far More Interesting

When a legendary investor like Michael Burry puts out a bearish call, the market listens. The man who famously predicted the 2008 financial crisis and profited massively from that prescient bet has earned his credibility. So when Michael Burry recently published a 10,000-word manifesto suggesting Palantir Technologies could fall to $46 per share—representing a 65% decline from current levels—plenty of people took notice. But here’s where I think the analysis misses the mark: the numbers tell a very different story.

The Credibility That Comes With Being Right Before

To understand why Michael Burry commands such attention, you need to understand his track record. In the mid-2000s, when most of Wall Street was celebrating subprime lending, Burry was one of the few contrarian voices warning of an impending catastrophe. His bets against the housing market turned $100 million personally for him and $725 million for his investors—a story immortalized in the film The Big Short. That kind of success breeds both respect and caution in the financial community.

So when Michael Burry outlines multiple scenarios for Palantir, ranging from $21 to $146 per share, investors naturally take the argument seriously. The problem is that even legendary investors can be wrong on specific stocks, even when they’ve been right on major macro calls.

Why Michael Burry Focused on the Past

Burry’s bear thesis against Palantir relies heavily on the company’s history. For nearly two decades before becoming profitable, Palantir struggled with irregular revenue streams, significant losses, and heavy spending. He highlighted concerns about accounting practices for forward-deployed engineers and questioned the company’s research and development allocations. The thesis essentially says: “Look at this company’s terrible track record—how can you trust it now?”

It’s a superficially compelling argument. But it commits the cardinal investing sin of fighting the last war.

Palantir’s Transformation: When Data Actually Started Moving Markets

The real issue with Michael Burry’s bearish position becomes apparent the moment you look at Palantir’s most recent quarter. This isn’t a company limping along—this is a company that’s fundamentally shifted its business model.

Revenue hit $1.4 billion in the latest quarter, up 70% year-over-year. More significantly, this marked the 10th consecutive quarter of accelerating growth—suggesting the company has moved past one-time deals and into genuine recurring revenue streams. Adjusted earnings per share jumped 79% to $0.25, demonstrating that growth is actually translating into profitability.

But the granular numbers are where the real story emerges. The U.S. government segment generated $570 million in revenue (up 66% YoY), while the commercial segment exploded 137% to $507 million. The catalyst? Unprecedented demand for Palantir’s Artificial Intelligence Platform—a tool that connects disparate data systems and delivers real-time analytics. During the quarter alone, the company landed 180 deals worth $1 million or more, including 84 deals valued at $5 million+ and 61 deals at $10 million+.

Perhaps most telling: Palantir finished the quarter with $4.26 billion in total contract value (essentially committed future revenue), up 138%. The company’s remaining performance obligations—money the company has already contractually obligated itself to recognize—surged 143% to $4.21 billion.

When Michael Burry Meets Modern Metrics

There’s one metric that separates truly healthy software companies from those merely trading on hype: the Rule of 40. This scoring system combines earnings growth rate and profit margin, with anything above 40 considered financially robust. Palantir’s score? 127%.

These aren’t the metrics of a company in trouble. These are the metrics of a company that has successfully transitioned from a struggling startup to a legitimate profit-generating machine.

Valuation Is Real—But So Is the Gap Narrowing

Here’s where I’ll actually agree with Michael Burry: the valuation is indeed stretched. At 214 times trailing earnings, Palantir isn’t cheap by any reasonable measure. Even using next year’s projected earnings, the stock trades at 74x forward PE—a premium to the broader market.

However—and this is crucial—the gap between price and value is closing rapidly. The 35% stock price decline that occurred prior to the recent earnings report already chiseled away at that multiple. More importantly, with earnings accelerating at this pace and revenue poised to continue surging, the multiple compression will likely continue.

Consider what happened on Wall Street: 13 of the 27 analysts covering the stock now rate it a buy or strong buy, up from just 6 a month prior. That shift wasn’t random—it was triggered by results that proved Michael Burry’s historical warnings no longer apply to Palantir’s current reality. Analysts at D.A. Davidson, after reviewing Burry’s entire 10,000-word missive, concluded there was “no new evidence or argument” that would change their investing thesis.

What Happens When the Market Disagrees With a Legend

The market is essentially saying: yes, Michael Burry was right about housing in 2008. Yes, his contrarian instincts are legendary. But in this case, Palantir’s transformation is real, and the current results prove it.

This doesn’t mean the stock is a screaming bargain. Smart investors considering Palantir should approach using dollar-cost averaging rather than deploying capital all at once. Taking positions on weakness—particularly during dips like the recent 35% decline—makes sense. But completely dismissing Palantir based on past failures, as Michael Burry’s thesis effectively does, is to miss the forest for the trees.

The real lesson here isn’t that Michael Burry is wrong about macro market timing. It’s that even the best investors sometimes extrapolate past performance too far into the future. Palantir isn’t the company that Michael Burry was analyzing—it’s the company that has emerged on the other side of a fundamental business transformation.