Shares of Palantir Technologies spiked 21% on Monday after Bloomberg reported that the data analytics software firm nabbed a $44.4 million contract with the US Food and Drug Administration (FDA) to help power drug reviews and inspections. The stock advanced another 4.6% in Tuesday’s pre-market trading.
The three-year deal will allow the FDA’s Center for Drug Evaluation and Research and the Oncology Center of Excellence to deploy Palantir (PLTR) software to integrate and analyze data. The software will help the US regulator approve drugs, including Covid-19 treatments, and monitor the safety of items like hand sanitizer.
Palantir has secured a number of government contracts globally in recent months, which now make up more than half of its total revenue. More recently, the company announced its software will help power the distribution of Covid-19 vaccines to 300 million Americans through Operation Warp Speed, according to the Bloomberg report.
The FDA contract comes after Palantir last month reported quarterly sales, which exceeded analysts’ expectations in what marked its first quarter as a public company. Even as it incurred a larger loss than in the year-ago period, the company raised its 2020 revenue outlook.
Since PLTR started trading at the end of September, the value of the stock has almost tripled. In reaction to the sharp rally, Morgan Stanley analyst Keith Weiss last week cut the stock’s rating to Sell from Hold, as he argues that Palantir trades at a large valuation premium over other software-as-a-service companies.
Weiss noted that the move in the stock was also driven by retail interest “squeezing institutional short interest.” (See PLTR stock analysis on TipRanks).
For now, the rest of the Street is sidelined on the stock. The Hold analyst consensus is based on 4 Holds and 1 Sell versus only 1 Buy. The average price target stands at $13.83, implying downside potential of about 52% to current levels.
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