Palantir Technologies (PLTR, Financial) risk of valuation compression may extend to 2025 and entice Jefferies analysts to downgrade the stock to the short side, they warn on Monday. At 46 times the enterprise value of the next twelve months' revenue (EV/NTM rev), the stock trades are still up 15% year to date (YTD) and are multiple times higher than the closest software peers. Following massive multiple expansion in 2024, when the token rallied 341%, it now has a market cap of $417.5 million.
Insider selling has raised additional concerns. Over the past five months, other executives offloaded $600 million while CEO Alex Karp sold more than $2 billion in shares, a disclosure made under Rule 10b5-1 trading plans. Analysts pointed out that such activity could act as an overhang for the stock.
Already, Palantir's valuation has shrunk 15% YTD, falling from 55x to 46x EV/NTM revenue. They likened this decline to post-COVID-19 normalisation, with a note that does not seem far off from saying changing interest rates, fading AI hype, and insider selling could trigger further compression.
The company's shareholder base has also changed over this time, adding to the complexity. Active institutional ownership rose to 32 per cent after inclusion in the Nasdaq 100 in December 2024, up five percentage points. This shift could also push down the stock's retail-inspired premium, changing investor dynamics, Jefferies analysts said.
Jefferies, which has an "Underperform" rating and a $28 price target, or more than a 56% downside from the last closing price, says the stock is aggressively overvalued.
