Analyst Note| Malik Ahmed Khan |
We are lowering our fair value estimate for narrow-moat Palantir to $8 from $13 as we are less optimistic about the company's long-term profitability and revenue growth. Along with reduced profitability, we are also lowering our Capital Allocation rating for the firm to Standard from Exemplary. Our change in the Capital Allocation rating is primarily driven by reduced confidence in Palantir's management team's ability to execute against the firm's long-term targets. A particular strategic misstep worth noting has been Palantir's risky investments in early-stage companies which have soured in the 2022 market correction. We view shares as fairly valued today but see opportunities elsewhere in the fast-growing technology sector.