Jefferies analyst Brent Thill recently reiterated a “Sell” rating on Palantir (PLTR) stock, implying a potential 55.5% downside potential from current levels. Thill expressed concerns over PLTR’s bloated valuation multiples, considering the 267% share price gain this year. He also pointed to rising insider sell trades of Palantir stock, citing CEO Alexander Karp’s planned sale of 9 million company shares through May 2025 as a cautionary signal.
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Thill has another important view on Palantir. He says that following its inclusion in the S&P 500 (SPX) index, the stock’s retail ownership declined by 7% to 42%. Meanwhile, institutional ownership increased to 25% for index funds and 27% for active funds. Thill added that Palantir’s decision to transfer its listing to Nasdaq and its intent to join the Nasdaq 100 (NDX) could attract increased institutional interest in its shares, but it may not change the ownership structure drastically.
A stock usually draws large institutional ownership when it gets added to an index. The attention from institutional investors generally triggers a rally in the stock. However, in Palantir’s case, the demand from institutional investors is already built into the stock price and the analyst does not see much upside from here on.
Further Insights into Thill’s Bearish Views
According to Thill, Palantir is currently trading at a 43x multiple of its projected 2025 revenue, one of the highest among software companies. The stock also trades at a 43x EV/Sales (enterprise value-to-sales) multiple based on the next twelve months’ revenue. Thill noted that such sky-high valuation multiples were witnessed during the COVID-19 bubble for high-growth companies, but are now unjustifiable and unsustainable in the current market environment.
Further, the analyst remains wary about the increasing number of insider stock sales for Palantir. Thill is particularly cautious about the CEO’s planned sale that was filed under Rule 10b5-1 trading plans with the U.S. SEC (Securities and Exchange Commission). Karp has already sold roughly 40 million PLTR shares valued at $1.9 billion in the last three months. He has another 9 million shares remaining to be sold under the plan through May 2025, which could potentially impact the stock price.
According to TipRanks Insider Trading Activity tool, PLTR currently has a Negative Insider Confidence Signal since corporate insiders sold PLTR shares worth $11.1 million in the last 3 months.
Is Palantir Stock a Good Buy?
Considering factors similar to Thill’s concerns, analysts prefer to remain on the sidelines on Palantir stock for now. On TipRanks, PLTR stock has a Hold consensus rating based on three Buys, seven Holds, and six Sell ratings. Also, the average Palantir Technologies price target of $33.73 implies 46.4% downside potential from current levels.
