It’s safe to say, it has been a good year for Palantir (NYSE:PLTR) investors. The shares are up by a huge 175% in 2023 with the Big Data specialist enjoying the spoils of this year’s tech bull run. But is that surge about to meet its day of reckoning?
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That is certainly the opinion of William Blair analyst Louie DiPalma, who notes that the stock is “valued similarly to NVIDIA, the stock equivalent of the LA Dodgers’ Shohei Ohtani, when its performance is more pedestrian.”
And given the latest news to come out of Palantir HQ on Friday, DiPalma foresees a shift in sentiment. “Shares of Palantir may start to reflect reality over the next three months once it is fully digested that the U.S. Army 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,” the analyst explained.
The Army originally awarded Palantir the Vantage contract in December 2019, in what was a $458 million four-year deal. With that deal having run its course and up for renewal, rather than being given another 4-year deal, only a one-year extension was awarded, with the Army planning to split the Vantage platform into pieces and hand out a multivendor contract.
The new contract not only has a shorter duration but also features a slightly reduced maximum annual run-rate ($115 million) compared to the previous $116 million revenue run-rate. It’s probable that Palantir won’t even receive the full $115 million, as the Army announcement suggests this figure serves as a ceiling value. Historically, the Army has consistently awarded Palantir less than 60% of the potential value specified in ceiling contracts, with notable instances including Project Maven, CD1, and CD2.
The November 30 Army presentation on the future of the Vantage platform featured signs Palantir would not be awarded another 4-year contract, but fueled by the Army’s December 8 press release stating it was “satisfied” with the existing Army Vantage program, there was renewed optimism amongst investors. “Apparently,” DiPalma sums up, “the Army was not satisfied enough to give Palantir a new $458 million deal.”
All told, then, DiPalma remains a fully-fledged PLTR bear, maintaining an Underperform (i.e., Sell) rating on the shares, without providing a fixed price target. (To watch DiPalma’s track record, click here)
Others on the Street do have a target in mind and it’s not a good one. The average target stands at $13.40, suggesting shares will shed 24% over the coming months. Overall, based on a mix of 4 Buys, 5 Sells, plus 4 Holds, the stock claims a Hold consensus rating. (See Palantir stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
