Top 3 Reasons to Avoid Investing in Palantir – Expert Analysis

Recently, an analyst from Jeffries named Brent Thill made a significant call on Palantir Technologies (PLTR, Financial). In a move that caught the attention of many investors, Thill downgraded Palantir from a “Hold” rating to “Underperform” while keeping the price target at $28 per share. This decision was driven by concerns about the company’s high valuation and slowing growth, leading Thill to advise investors to exercise caution when considering Palantir. Let’s break down the main reasons behind Thill’s recommendations:

Firstly, Thill pointed out that Palantir’s stock price has surged by a massive 237.26% year-over-year since 2023. This surge can be attributed to the growing adoption of its Artificial Intelligence Platform (AIP) and its strong partnerships with major clients, including various governments worldwide. Despite this impressive growth and solid fundamentals, Thill believes that Palantir may be overvalued at its current price of $64.35 per share.

Moreover, concerns were raised about insider trading at Palantir. Thill highlighted that the company’s insiders have been selling their stock at an increasing rate over the last few months, even as the share price continues to rise. For instance, Palantir’s CEO, Alex Karp, has already sold approximately 40 million shares in the past three months, totaling over $1.9 billion. This significant selling activity could potentially create an overhang on the stock, according to Thill, with Karp still authorized to sell an additional ~9 million shares until May 2025.

Lastly, Thill noted a decline in retail ownership of Palantir following its inclusion in the S&P 500 index. Retail ownership dropped by 7 points to 42%, while index ownership increased to 25% and institutional ownership to 27%. This shift may result in a more stable and less volatile stock price, which may not be favored by retail traders and could potentially lead to lower stock prices in the future.

While Thill’s price target of $28 per share might seem lower than what other analysts predict, it’s essential to consider his insights alongside others. Analysts, on average, give Palantir a one-year price target of $38.88, with a high estimate of $75.00 and a low estimate of $11.00. This average target implies a downside of -39.58% from the current price of $64.35. By diving deeper into Palantir’s performance with charts and Guru insights, investors can make more informed decisions about their investment strategies.