Big data analytics companies need big companies and their contracts to analyze. If the contracts begin to dwindle, or to slow in growth, the firms will suffer. In the case of Palantir Technologies Inc. (PLTR), the company will continue to slide if it cannot secure more high-profile deals to enhance its commercial revenue. Beyond a $90 million deal expected to be announced in the near-future, PLTR does not appear to have too much left in its pipeline. (See Palantir stock charts on TipRanks)
Drawing up his bearish hypothesis is Kamil Mielczarek of William Blair, who wrote that the big data analytics firm has accumulated far less in U.S. government contracts over the previous quarter than it did the year prior, and is currently experiencing a “dry spell.” He does not expect Palantir’s progress thus far to sustain an acceleration in revenue growth.
Mielczarek reiterated a Sell rating on the stock, although he did not provide a price target.
The analyst noted that beyond a contract with the United States Space Force (USSF) Palantir has not yet secured another contract with the U.S. Department of Defense (DoD). The company is mostly inking smaller civil government contracts, which will not be enough to outweigh its lack of business. Additionally, after a strong year of COVID-19 driven contracts, a deceleration in infection rate could run in tandem to PLTR’s cash flow.
Arguing that there are several risks which have yet to be baked into the stock price, Mielczarek suggested that “Palantir has struggled to achieve the same type of hypergrowth for its commercial division that many of its data analytics peers have achieved.”
A non-concern for Mielczarek is Palantir’s situation with the Department of Homeland Security’s Immigration and Customs Enforcement (ICE) agency. Although the agency is reevaluating its partnership with Palantir, this is normal activity and does not indicate a guaranteed loss for the company.
On TipRanks, PLTR has an analyst rating consensus of Moderate Sell, based on 1 Buy, 2 Hold, and 3 Sell ratings. The average Palantir Technologies price target is $24, which represents a potential 12-month downside of –1.36%. PLTR closed trading Friday at a price of $24.33 per share.
Disclosure: At the time of publication, Brock Ladenheim did not have a position in any of the securities mentioned in this article.
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