Next stop for Palantir stock? Lower, Jefferies says

Investing.com -- Jefferies analyst Brent Thill sees further downside ahead for Palantir stock, arguing that valuation pressure is likely to continue even after a sharp pullback this year.

The company’s shares have already fallen 27% year to date, but remain expensive relative to the broader software sector despite a major compression in trading multiples. Thill highlights that Palantir (NASDAQ: PLTR) stock had reached as high as 73 times forward revenue in November before sliding to around 31 times, still nearly double the next most expensive large software name.

“We’re making a call on valuation, not on fundamentals,” he wrote in a Friday note to clients.

“We acknowledge PLTR’s fundamentals have been rapidly improving, and we believe its competitive differentiation has only strengthened while TAM has expanded. However, the downside risk to its trading valuation more than offsets the upside opportunity from improving fundamentals.”

The premium leaves the stock vulnerable to shifts in market sentiment, particularly around AI enthusiasm and broader software sector momentum.

Thill argues that the current multiple “makes PLTR especially susceptible to changes in narrative,” including concerns about slowing growth or cooling AI-related optimism. “We believe that the declining sentiment in the software industry could expedite PLTR’s return to more sustainable valuation levels,” he added.

The comments come despite Palantir’s very strong fourth-quarter results. The company reported accelerating revenue and U.S. commercial growth, expanding operating margins, and issued initial 2026 guidance pointing to continued momentum across key metrics.

Still, the blowout print failed to support the elevated valuation, with the stock retreating roughly 21% after the release.

Jefferies maintained its Underperform rating and $70 price target on Palantir stock.

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