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Why a New Army Contract May Not Be Enough for Palantir (PLTR) Stock

  • Palantir (PLTR) and Raytheon (RTX) were selected for a 14-month contract for the Army’s TITAN project.
  • Shares are not rallying on the news, as the deal is for only $36 million.
  • While certainly not a negative, the stock (and sector) is caught in a bear market and will need better news than this to spur it higher.
PLTR stock - Why a New Army Contract May Not Be Enough for Palantir (PLTR) Stock

Source: Spyro the Dragon /

Palantir Technology (NYSE:PLTR) just landed itself a $36 million contract from the Army. Unfortunately for investors, PLTR stock is not rising on the news. Instead, shares are down about 2% on Thursday at the time of writing. This comes as the overall market moves lower.

As for the deal, Palantir will be one of two companies developing a prototype for the Army’s project. This project is called TITAN, which stands for Tactical Intelligence Targeting Access Node. Further, Palantir will do so alongside Raytheon Technologies (NYSE:RTX). The two companies previously won a 12-month assignment for the design phase of the TITAN program in January 2021.

Now they’re on to the prototyping phase, which should take about 14 months. Both companies will be prototyping the first intelligence ground station enabled by artificial intelligence and machine learning. Specifically, “Palantir’s Modular Open System Architecture (MOSA) will be the critical backbone that provides correlation, fusion, and integration of sensor data alongside insights from AI/ML overlaid at the tactical edge.”

PLTR Stock Needs a Hand

The deal is obviously a positive at a time when there are a lot of negatives to focus on. Unfortunately, it doesn’t really move the needle all that much.

Kamil Mielczarek, an analyst at William Blair, had this to say: “While this deal is incrementally positive for Palantir, it makes up only 1%-2% of last-12-months’ revenue and does not grow total deal value at a fast enough rate to return total government revenue growth to 30%.”

For what it’s worth, Mielczarek has an underperform rating on PLTR stock.

When we break it down, $36 million is a drop in the bucket for a company forecast to do roughly $2 billion in sales this year. Again, the contract is good news — it’s better than no deal or losing a contract — but it’s a minor impact at the end of the day.

On the plus side, analysts expect the company to grow revenue almost 30% in 2022 and 2023. Further, consensus estimates call for roughly 30% earnings growth this year and an acceleration up to 40% growth in 2023. That’s great news!

On the downside, shares still trades at about nine times this year’s revenue, leaving it a bit on the expensive side given that we’re in a bear market. Overall, PLTR stock is down 50% this year and almost 70% from its one-year high. From the all-time high, shares are down 80%.

On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.

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