Palantir Technologies Inc (NYSE:PLTR)’ stock has fallen sharply this year, and Jefferies analysts say valuation concerns could continue to weigh on the shares even as the company’s operating performance improves.
Jefferies noted Palantir’s stock is down about 27% in the year-to-date and warned that further multiple compression could occur.
“We believe multiple downside outweighs fundamental upside,” the analysts wrote, reiterating an ‘Underperform’ rating and a $70 price target. Shares traded hands at about $135 on Friday afternoon.
The analysts said Palantir’s growth story and execution had driven its valuation to elevated levels in late 2025, when the stock traded as high as 73 times calendar 2027 revenue. Since then, the multiple has fallen to roughly 31 times, but Jefferies argues the stock still trades at a premium to peers.
“Even so, the stock is trading at a meaningful premium to other high-quality, high-growth software stories such as Cloudflare (16x), Crowdstrike (13x) and Snowflake (7x),” the analysts wrote.
Jefferies highlighted that its call is focused on valuation rather than business fundamentals. “We’re making a call on valuation, not on fundamentals,” the analysts wrote, adding that Palantir’s fundamentals “have been rapidly improving” and that its competitive positioning and total addressable market have expanded.
However, they said the elevated valuation leaves the stock vulnerable to shifts in sentiment. “The high multiple makes PLTR especially susceptible to changes in narrative,” the analysts wrote, citing potential risks including a cooling of AI enthusiasm, fears of AI disintermediation, or a slowdown in revenue growth.
Further, Palantir recently delivered what Jefferies described as one of its strongest quarters, with broad-based acceleration across key metrics. The analysts pointed to US commercial revenue growth of 137% year over year and operating margins of 57%, alongside guidance indicating continued momentum in 2026.
“Although results were overwhelmingly positive and estimates were revised up significantly, the stock has quickly faded 21% post print,” the analysts wrote.