Palantir's New Contract with US Army Not Enough for Stock to Turn Higher - Analyst

June 30, 2022 9:19 AM EDT
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It was announced yesterday that Palantir Technologies (NYSE: PLTR) is one of two companies awarded a contract by the U.S. Army for the Tactical Intelligence Targeting Access Node (TITAN) project.

TITAN is the first Intelligence ground station enabled by Artificial Intelligence (AI) and Machine Learning (ML). The contract is worth $36 million for the competitive prototyping phase that will last 14 months.

“Now more than ever, the Nation’s warriors and allies are being asked to make more decisions, at a faster speed, with more available data,” said Aki Jain, President of Palantir USG. “TITAN is the crucial combination of the Defense Industry’s best technology from both emerging and enduring DOD partners, and we’re proud to serve as a non-traditional prime contractor for this effort.”

William Blair analyst Kamil Mielczarek has downplayed the significance of this contract on Palantir’s business.

“While this deal is incrementally positive for Palantir, it makes up only 1%-2% of last-12-months’ revenue and does not grow total deal value at a fast enough rate to return total government revenue growth to 30%,” Mielczarek told clients in a note.

Therefore, the analyst remains “cautious on Palantir shares” given the pressure on gross margin due to competition and partnerships.

Mielczarek rates Palantir stock, which is down 2.5% in pre-open trading, as Underperform.

By Senad Karaahmetovic

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