Palantir's Army-contract win sends stock surging

By Emily Bary

One bear is still cautious in the wake of a new Army award that could help reaccelerate U.S. government revenue

Palantir Technologies Inc. won a new Army contract, and that was giving its stock a big lift in Wednesday's premarket action.

Shares of Palantir (PLTR) were up more than 7% in early trading after the company said it won a U.S. Army award for development of the military branch's "next-generation deep-sensing capability," which will be powered by artificial intelligence.

The agreement, valued at $178.4 million, is for the Army's Tactical Intelligence Targeting Access Node (Titan) ground station system and covers 10 prototypes.

William Blair analyst Louie DiPalma suspected a day earlier that Palantir had won the contract, and according to his tracker, the deal "would be Palantir's fourth-largest contract by annual revenue run-rate."

While Palantir's U.S. commercial business has seen explosive growth lately thanks in part to uptake of the company's Artificial Intelligence Platform, the U.S. government business has been more sluggish.

"In our view, the Titan and Maven contracts will cause Palantir's U.S. government revenue to accelerate from its fourth-quarter 5% rate, which was the lowest mark since Palantir went public," DiPalma wrote. Maven refers to a defense contract.

Still, DiPalma remains bearish on Palantir shares, writing that Palantir's forecast for 2024 revenue trails where the consensus sell-side projection had been in January 2023, back when Palantir's stock was trading between $6 and $8.

"Ultimately, AI has not made a profound impact on Palantir's consolidated revenue trajectory," he wrote. "Even when adding this $89 million per year Titan contract to 2024 revenue, the total is still below analyst projections when the stock was trading 67% lower, despite robust demand environments on both the commercial and defense sides of the business."

DiPalma rates the stock at underperform.

-Emily Bary

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03-06-24 0805ET

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