Palantir Technologies (PLTR, Financials) shares have surged more than 250% in 2024, driven by momentum from its artificial intelligence initiatives and customer engagement programs.

But pointing out notable insider selling, Jefferies analysts cautioned that the valuation growth of the company could not be sustainable.

• Warning! GuruFocus has detected 7 Warning Signs with PLTR.

Leading Brent Thill's statement to investors, Jefferies analysts under Rule 10b5-1 stressed as a possible issue rising insider sales. Over the last three months, Alex Karp, the CEO of the firm, has sold around 40 million shares for a total of $1.9 billion; just two weeks alone alone have seen more than 18 million shares valued at over $1 billion sold. About twenty percent of Karp's total firm ownership consists on these transactions. Further strain on the market might come from his present trading strategy allowing the selling of another 9 million shares until May 2025.

Jefferies also raised valuation issues, pointing out that while Palantir's calendar year 2025 income projections have grown by 11% year-to-date, its next 12 months' sales multiple has risen by 202% in the same time. Currently trading at 43 times its enterprise value to NTM sales, the stock's level Jefferies is comparable to the height of the COVID-19 market bubble.

"The last time we saw such high magnitudes of multiple expansion was during the Covid bubble, when many of the high-growth names saw their multiples significantly expand at the same time," Thill said.

Jefferies has an Underperform rating on Palantir and a price target of $28; PLTR shares are changing hands for $62.2 in Tuesday's early market trading.

This article first appeared on GuruFocus.