What Does a $115M Contract Mean for Palantir Technologies (PLTR) Stock?

What Does a $115M Contract Mean for Palantir Technologies (PLTR) Stock?

Posted On December 22, 2023 10:30 am

Palantir Technologies Inc. (PLTR), a leading data analytics company, last week announced a one-year extension of its partnership with the U.S. Army’s Program Executive Office for Enterprise Information Systems (PEO EIS) to continue powering the Army Vantage data-driven operations and decision-making platform.

The value of the contract, inclusive of options, is $155.04 million, with $97.35 million awarded and $35.60 million in initial funding. Following this news, PLTR stock briefly traded higher on Friday.

The Vantage program is a keystone in the U.S. Army’s transformative efforts to leverage data as a strategic asset, integrating data sources from within the Army and across the Department of Defense (DoD) to offer a real-time operational enterprise data ecosystem.

Under the extended agreement, PLTR will continue to provide its open data and analytics platform through the delivery of new AI-enabled capabilities and open platform infrastructures that advance the program’s evolution to the Army Data Platform vision.

Akash Jain, President of Palantir USG, said, “Building on our shared history of operational excellence and innovation, our partnership has consistently provided the Army with a decisive edge in data-driven decision-making. This extension is evidence of the value we bring to the nation’s defense, including our joint efforts to provide more commercial technology providers the opportunity to equip soldiers with the innovation they need to meet their most pressing challenges.”

Palantir, which obtains a significant portion of its revenue through government contracts, will benefit considerably from this extension of its pivotal partnership with the U.S. Army’s Vantage Program.

Following this news, BofA analyst Mariana Perez Mora maintained a Buy rating and price target of $21 on PLTR’s stock, stating that this one-year extension was unexpected.

Mora said, “The up to $115mn contract extension is in line with the annualized rate of the original contract award ($458mn), slightly below the annualized actual action obligation ($480mn) and 15% higher than Option year 2/3 average obligations. $35.6mn were obligated at the time of the award.”

“We think that PLTR has a strong position to remain a key provider of data engineering & orchestration capabilities in a growing data-centric operational strategy. The recent contract extension and the fact that PLTR can add AIP capabilities to existing offerings support our thesis,” she added.

On the contrary, William Blair analyst Louie DiPalma maintained a bearish stance on the stock, keeping an Underperform rating.

DiPalma said in a note last Friday that shares of PLTR “may start to reflect reality over the next three months once it is fully digested that the U.S. Army last night only awarded Palantir a short-term, one-year $115 million ceiling extension for Palantir’s second-largest contract on its books, the U.S. Army Vantage program.”

“When the Army originally gave Palantir the Vantage contract in December 2019, it awarded Palantir a…

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