Palantir (PLTR) stock was set to snap a five-day losing streak on Tuesday, January 14th, shrugging off an analyst warning and further selling by Cathie Wood’s ARK Investment.
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Despite a downbeat assessment from Jefferies analysts, shares of the data analytics and software developer rose more than 4% in early trade amid a broader rebound for tech stocks following a softer-than-expected producer price index inflation report in the U.S.
PLTR “Facing Multiple Compression Risks”
However, analysts remain cautious after a big rally last year. The company’s enterprise value to next-12-months of revenue multiple has fallen by 15% this year after an approximately 12% decline in the shares. The multiple was down from 55x to 46x, following a 282% expansion in the multiple during 2024.
By comparison, the last time there was such a large multiple expansion was during the COVID-19 bubble, said Jefferies analyst Brent Thill.
“However, we are now in a more normalized macro environment, and we think any negative factors (changing interest rates, AI hype turns, insider selling, etc) may cause PLTR’s multiple to further compress,” he said in a note.
Moreover, an increase in institutional shareholder ownership since the stock’s inclusion in the Nasdaq 100 could reduce the retail premium the stock has enjoyed.
He stuck to a Sell rating on PLTR stock and the price target of $28, which implies a downside potential of more than 58% from current levels.
Last week, Morgan Stanley reiterated its Sell rating on the stock, warning PLTR could fall by 25% in the coming months.
Meanwhile, Cathie Wood has been trimming her position in PLTR, with the stock dipping sharply last week on news that ARK Invest had offloaded about $15 million worth of the stock, cutting its allocation in the ARK Fintech Innovation ETF (ARKF) to 4.2%. Since then, the allocation has been further cut to 4.11%, implying further selling. PLTR also makes up 5.74% of the ARK Innovation ETF (ARKK).
Is PLTR a Good Stock to Buy?
Overall, Wall Street has a Moderate Sell consensus rating on PLTR stock, based on two Buys, eight Holds and seven Sells. The average PLTR price target of $46.57 implies over 30% downside potential from current levels. Shares of PLTR have risen more than 300% in the last 12 months.
