Investing.com — Shares of Palantir (NASDAQ: ) could face further downside in 2025 due to multiple compression risks, Jefferies analysts said on Monday.
The company’s shares are down 15% year-to-date (YTD), but the stock still trades at 46 times trailing-twelve-month enterprise value (EV/NTM rev), twice the value of the next largest software company. This valuation comes after the stock experienced a 341% rise in 2024.
Jefferies analysts note that insider selling is on the rise, with CEO Alex Karp selling more than $2 billion worth of Palantir stock and other executives selling more than $600 million in the past five months. An increase in insider sales through trading plans under Rule 10b5-1 could potentially create an overhang on the shares.
Palantir saw its EV/NTM revenue multiple fall 15% year-to-date, falling from 55x to 46x, after a 282% increase in its 2024 multiple.
“The last time we saw multiple expansion sizes this large was during the Covid bubble when many high-growth names saw multiple expansions expand significantly at the same time,” analysts led by Thill said in a note.
“However, we are now in a more normalized macro environment and think any negative factors (change in interest rates, hype AI reversals, insider selling, etc.) may cause the PLTR multiple to compress further,” they added.
Analysts also point out that the composition of Palantir’s shareholder base has changed recently, with active institutional ownership increasing by five percentage points to 32% following the company’s incorporation on December 23, 2024. This change, according to analysts, could reduce the retail premium going forward.
Jefferies reiterated an Underperform rating on Palantir stock and a $28 price target, implying a potential downside of more than 56% from its last close.
