Palantir plummets 18% after Morgan Stanley downgrades company on questionable valuation following massive run

• Palantir plummeted as much as 18% on Wednesday after Morgan Stanley downgraded the company to Under-weight from Equal-weight.
• Palantir has seen a massive rally since it went public in September, surging as much as 235% based on last Friday's high of $33.50.
• "With very little change in the fundamental story, the risk/reward paradigm shifts decidedly negative for the shares," Morgan Stanley warned.
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Palantir declined as much as 18% on Wednesday after the high-flying tech firm was downgraded to "Under-weight" by Morgan Stanley.

An "Under-weight" rating is equivalent to a Sell rating on Wall Street. The downgrade came after Morgan Stanley downgraded Palantir to "Equal-weight" from "Over-weight" last month.

Morgan Stanley set a $17 price target for Palantir, representing potential downside of 34% from Tuesday's close.

The driving factor behind Morgan Stanley's downgrade is a heightened valuation for Palantir with very little change to its fundamental story since the company went public in September.

Shares of Palantir have rallied as much as 235% since its September 30 debut, based off of its all time high of $33.50 reached last Friday.

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"With very little change in the fundamental story, the risk/reward paradigm shifts decidedly negative for the shares," Morgan Stanley warned.

Morgan Stanley isn't alone in its bearish call on Palantir. Last week, famed short-seller Andrew Left of Citron Research called Palantir's rally unsustainable and called the stock a "casino."

"What a run the past month for all. But as traders looking for short exposure, $PLTR is no longer a stock but a full casino," Citron said.

Citron expects Palantir to tumble to $20 by year-end.

Shares of Palantir are down 33% since last week's high, as of Wednesday afternoon trades.

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