Palantir Stock Is a Great Data Play Even Without Its Government Ties

Denver-based analytics company Palantir (NYSE:PLTR) has been a victim of biased media coverage, and it’s hurting PLTR stock.

Palantir Technologies (PLTR) headquarters
Source: Sundry Photography /

Its detractors continue to push bearish arguments, including its controversial links with the CIA and its lackluster profitability record. They have turned a blind eye on several positive developments from the company, including its $91 million US Army contract.

Moreover, the belief that it’s purely a defense contractor is inaccurate as its enterprise customer base contributes equally to its revenues. Additionally, PLTR stock is cheaply valued, which further cements its bull case.

PLTR stock is currently trading slightly under $10, which given its massive potential, suggests that it is undervalued. Revenues grew 46% on average during the first half of the year.

Given the fertile environment for companies such as Palantir, you’d expect revenue growth to continue on a similar path next year. Hence, the ideal price and the immense potential of PLTR stock makes it an exciting prospect for investors.

A Closer Look at PLTR Stock

Though it’s inaccurate to consider Palantir as entirely a defense contractor, it isn’t hard to get why it’s labeled that way. The company is winning some major contracts with defense agencies and the government, pushing revenue growth rates.

It recently announced a $91 million US Army AI contract. The company will develop AI and machine learning capabilities for the U.S. Army Research Laboratory. The deal includes using the company’s tailor-made defense platform called Gotham in enhancing the Army’s research work.

Moreover, the company also announced a $36 million contract with the National Center for Advancing Translational Sciences (NCATS), providing data integration and data management services.

That’s $121 million worth of contracts, which alone should pique the interest of most investors. Additionally, the company is helping the U.S. government develop a system for deploying the coronavirus vaccines.

These exciting developments come when the government and military are spending heavily on AI, data, and software. A large part of this is the ongoing feud between the US and Chinese governments, which continues to escalate.

A recent data leak detailed how China was developing a surveillance database to extract information from U.S. citizens and the military. Hence, a crackdown against Chinese software companies is plausible, especially after the recent TikTok fiasco.

One of Palantir’s competitors, the Chinese analytics startup MiningLamp, could also be forced to halt operations. At least 40% of the companies in the Fortune 500, use MiningLamp’s data solutions.

Not Just a Defense Company

Contrary to popular belief, Palantir is not purely a defense company. It’s true, though, that it derives roughly 50% of its revenues, making waves in the sector with its refined products. However, its significant proportion still comes from the enterprise sector, making it a true Big-Data company.

The company believes that its Total Achievable Market could exceed $100 billion. Additionally, it believes that roughly 52.9% of its revenues will come from its enterprise customers. Palantir has a lot of scope for growing its revenues in an industry with a lot of room for expansion.

The great thing about the company’s customer base is that most of them are in it for the long term. Its “Acquire, Expand, and Scale” strategy ensures that partnerships with customers are for the long term, helping them consistent and sizeable revenue streams. Its average customer spends over $5 million after its initial year.

Final Word on PLTR Stock

The media wants you to believe that Palantir is an unprofitable defense contractor with a bleak future ahead. The reality, though, is significantly different, as the company is growing rapidly and refining its product base for its varied customer base.

It has scored some significant contracts with the government and the military, which alone should get investors interested. Moreover, the potential void left by Mininglamp could prove to be a massive opportunity for the company moving forward.

With margins as high as 75%, the management feels that the company could become profitable within the next couple of years.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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