Burry’s Massive Puts vs. a Street‑High $255 Target From Bank of America – Who Should You Follow?

Michael Burry has been butting heads with the bulls on Wall Street, specifically regarding Palantir (NASDAQ:PLTR | PLTR Price Prediction). The bulls have won big so far, and the price targets have gotten even bolder. On the other hand, most analysts are sitting on the fence with a “Hold” rating, with three analysts having “Sell” ratings on the stock. There are four “Strong Buy” ratings, with the highest price target at $255, from Bank of America (NYSE:BAC).

Burry believes PLTR stock may be on the cusp of an implosion, with his bearish thesis focusing on the sky-high valuation of the stock. PLTR stock trades at 156 times trailing sales and at 552 times trailing earnings. It still trades at 175 times next year’s expected earnings, which is an unprecedented valuation that no other big tech stock has seen since the Dot Com era.

Burry’s putting his skin in the game against PLTR stock

This may be old news by now, but it’s worth a refresher before we get to the meat.

Burry holds put options on approximately 5 million Palantir shares, with a notional value of around $912 million. This is the largest bearish bet in his portfolio and constitutes 66% of his reported holdings. The true amount involved is much lower. Burry himself posted on X, saying that he spent $9.2 million buying 50,000 put options on Palantir.

These options expire in 2027 at a strike price of $50. Burry is betting that PLTR stock will decline well below $50, allowing him to sell higher at the strike price when it expires.

Regardless, this is a drop in the bucket compared to how much Burry’s spending power. The notional value did lead to dramatic headlines and lured in comments from Palantir CEO Alex Karp, who called Burry “batshit crazy” during an interview.

What the bulls see

The bulls’ argument is essentially that Palantir is an extraordinary company that deserves an extraordinary valuation. It has managed to grow significantly after getting its foot in the door at any company/agency. What truly makes this growth special is that the company has a free cash flow margin of nearly 50%. For a company believed to be early on in its growth cycle, Palantir is truly exceptional.

Management has austerely steered the wheel, and it has worked wonders. Karp has said that Palantir will be cutting even more employees while the company sees accelerating revenue growth. This is possible because Palantir makes software and then automates the upkeep of its own software through Palantir Apollo. In turn, companies or agencies using its software turn into ultra-high-margin customers with little churn.

Full-year free cash flow is estimated to be up to $2.1 billion. This is most likely an underestimate as Palantir tends to lowball its guidance to keep expectations low.

If we take the higher-end revenue estimate of $7.39 billion for 2026 and assume a 50% FCF margin, PLTR stock is trading at ~120 times forward FCF today. This makes the stock’s valuation more defensible, but it’s undeniably expensive.

Who should you side with?

Burry has made valid claims, but he has racked up a history of failed attempts to repeat his Great Recession wins. With Palantir, he may end up being proven right if the AI rally ends prematurely, but PLTR stock falling below $50 by 2027 is not something I’d bet on.

That’s a valuation of $119.24 billion in January 2027, or ~28 times 2027 expected FCF.

Chances are, Palantir will likely disappoint with growth or profits sometime in the near future, and the stock could temporarily pull back in response. That said, PLTR stock trading at such a low valuation is very unlikely a year out. Many bears will start reaching for their wallets if PLTR stock drops below $100.

Only a catastrophic recession could make that happen, and you’d have bigger things to worry about.

In spite of everything, I would actually follow Burry if you are a bear. There’s no knowing how long this rally will continue. Thus, keep the vast majority of your portfolio in safe assets like Treasuries and only bet a small portion against stocks like PLTR. Burry is worth hundreds of millions, and he spent just $9.2 million on his PLTR put contracts.

If you’re a bull, I would stay away from blindly chasing the rally and put a hard cap of ~10% of a portfolio on a stock like PLTR. We’ve seen nothing like Palantir, but insofar as valuation goes, the only “precedent” was the Dot Com bubble.