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Palantir may face further declines in 2025 due to valuation risks, Jefferies analysts warned. Despite a 15% year-to-date (YTD) drop, the stock trades at 46x enterprise value to next twelve months' revenue (EV/NTM rev), over double the next highest software company's valuation. This follows a remarkable 341% rally in 2024.
Insider selling has surged, with CEO Alex Karp selling $2 billion in shares and other executives unloading over $600 million in the past five months. Analysts suggest these sales, conducted via Rule 10b5-1 trading plans, could weigh on investor sentiment.
Palantir’s EV/NTM revenue multiple contracted 15% YTD, declining from 55x to 46x after a dramatic 282% expansion during 2024. Analysts liken this to the COVID-era bubble when high-growth stocks saw extreme valuation spikes. However, in today’s stabilized macro environment, factors like shifting interest rates, reduced AI hype, and insider selling could lead to further multiple compression.
Additionally, Palantir’s shareholder composition has shifted, with active institutional ownership rising to 32% after its inclusion in the Nasdaq 100 in late 2024. Jefferies analysts believe this could reduce the retail-driven premium on the stock.
Jefferies reiterated an Underperform rating with a $28 price target, signaling over 56% downside potential from its current level.
Palantir's volatile performance and elevated valuation pose significant risks, leaving investors cautious about its prospects in 2025.
