The U.S. Army has executed the second option year of its partnership with Palantir Technologies, Inc. (NYSE: PLTR), an American software company specializing in big data analytics. Following the news, shares of the company jumped almost 4% to close at $19.06 on Friday.
Details of the Contract
In December 2019, the U.S. Army’s Program Executive Office for Enterprise Information Systems (PEO EIS) inked a $458 million production agreement with Palantir. Per the terms, Army Vantage, a comprehensive data analytics platform to facilitate data-driven decision making, agreed to be powered by Palantir’s software.
The central operating system of Palantir’s software offers real-time visibility and controlled access to diverse Army data sources on an integrated data platform. Markedly, the Palantir platform enables organizations to use data in a better way, by breaking down silos and offering a single operating picture for decision making, the company said.
Notably, the agreement was for a base year and three option years. Palantir was awarded a contract worth $110 million at the time for the base year, $113.8 million in December 2020 for the first option year, and now $116.3 million for the second option year.
Benefits of the Program
The Army Vantage platform allows the Army to leverage its data as a strategic asset. The Army’s partnership with Palantir since the platform’s launch has helped integrate more than 30,000 unique data sets from over 160 distinct systems.
Global Defense Lead at Palantir Technologies, Doug Philippone, said, “The Army Vantage program is the cornerstone of the Army’s ability to make data driven decisions across the force. This partnership reinforces what industry and government can do at speed to solve hard problems.”
Wall Street’s Take
Last month, Credit Suisse analyst Phil Winslow initiated coverage of Palantir with a Hold rating and a price target of $25 (31.16% upside potential).
Winslow believes that Palantir offers a differentiated “converged data fabric” and Palantir Foundry has significant potential within the commercial business. However, the company’s reliance on large deals with few customers could continue to drive uneven financial performance, the analyst added.
The rest of the Street is bearish on the stock, with a Moderate Sell consensus rating based on 1 Buy, 3 Holds, and 4 Sells. The average Palantir price target of $23.14 implies 21.41% upside potential. Shares have fallen 33.2% over the past year.
Palantir expects upcoming earnings for the fourth quarter of 2021 to be released in mid-February.
Risk Analysis
According to the new TipRanks Risk Factors tool, Palantir stock is at risk mainly from two factors: Finance and Corporate and Ability to Sell, which contribute 42% and 21%, respectively to the total 84 risks identified for the stock.
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