- Wednesday, October 16, 2024
Palantir Technologies, a leading analytics-software company, has experienced a strong surge in its stock value this year. However, according to William Blair analysts, the company's future gains might be limited by customer concerns regarding data ownership.
Recently, comments made during a presentation by U.S. Army officials highlighted potential friction between the Army and Palantir over data ownership. This particularly relates to the $458 million contract for the Army Data Platform, which is set to end within weeks. William Blair analyst Louie DiPalma suggests that these comments indicate that Palantir's contract renewal will likely be significantly less than the original amount.
DiPalma believes it is probable that the Army will offer Palantir a two-year contract and develop a future system with multiple vendors. This approach would consequently reduce Palantir's annual revenue stream of $116 million over the medium term.
While this analysis specifically focuses on a single contract, it is important to note that Palantir heavily relies on federal government contracts, primarily within the defense and intelligence sectors.
DiPalma, with an Underperform rating on Palantir stock, argues that the current trading value of Palantir shares is not sustainable in the long term. The shares currently trade at a staggering 125 times the forecast 2023 free cash flow. DiPalma suggests that this high multiple has the potential to compress to a mid-30s multiple due to competitive pressures for new defense contracts.
In early trading on Monday, Palantir stock experienced a 2.8% decline, reaching $19.70 per share. Nevertheless, the stock has more than tripled in value this year so far.
Note: Palantir Technologies did not respond immediately to requests for comment.
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