Palantir (NYSE:PLTR) shares have been in melt-up mode, surging almost constantly throughout 2024. They boast impressive year-to-date gains of 262% as investors applaud the company’s positioning in the AI game.
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However, for those itching to participate in the rally, Jefferies analyst Brent Thill advises them to consider the stock’s “unsustainable multiple,” which makes it a risky bet right now.
The numbers back up his warning. While Palantir’s CY25 revenue estimates have risen by 11% this year, its next-twelve-month (NTM) revenue multiple has skyrocketed by 202%, now trading at an eye-popping 43x EV/NTM revenue.
“The last time we saw such high magnitudes of multiple expansion was during the Covid bubble when many of the high growth names (SNOW, CRWD, DDOG) saw their multiples significantly expand at the same time,” Thill observed.
In today’s more stable macroeconomic environment, Palantir’s trajectory is striking. Its multiple expansion is over 4x greater than its closest infrastructure peer, Oracle, which has seen a comparatively modest 48% increase in its NTM revenue multiple.
Additionally, insider selling on 10b5-1 plans has been picking up while the stock has been soaring. Over the past three months, CEO Alex Karp has sold nearly 40 million shares, totaling over $1.9 billion, including more than 18 million shares valued at over $1 billion in just the last two weeks. To date, he has divested around 20% of his overall stake, but under his current Rule 10b5-1 trading plan, he is authorized to sell an additional ~9 million shares through May 2025. This, says Thill, could create a “further overhang for the shares.”
The stock’s big moves can also be attributed to the fact this name is popular amongst retail investors. However, following its S&P 500 inclusion, retail ownership in Palantir has declined by 7pts to 42%, while index and active institutional ownership have risen by 4 and 3 percentage points, respectively, to 25% and 27%. This shift could potentially “reduce the retail premium” moving forward.
So, what does this ultimately mean for investors? Thill’s recommendation is to stay away; the analyst rates the shares as Underperform (i.e., Sell) backed by a $28 price target. That figure factors in a 12-month drop of 55% from current levels. (To watch Thill’s track record, click here)
Amongst Thill’s colleagues, 5 other analysts join him in the bear camp and with an additional 7 Holds and 3 Buys, the stock claims a Hold consensus rating. However, most also think the shares are significantly overvalued by now; the $33.73 average price target suggests shares are due a ~46% pullback. (See Palantir stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
