Shares of Palantir (NYSE:PLTR) are still under pressure following a warning from William Blair analyst Louie DiPalma, bringing PLTR stock’s five-day loss to more than 10%. DiPalma recently released a note on the big data analytics company, cautioning that its contract with the U.S. Army could receive a reduction.
Palantir signed a four-year $458 million contract with the U.S. Army back in December 2019. That contract is set to expire within the coming weeks. However, comments made at a recent industry event may bring concern to PLTR stockholders.
“The tone of the comments and plan to ‘maximize the use of open-source vendors’ provide a strong indication that Palantir’s renewal contract […] will be significantly less than the original $458 million,” said DiPalma.
PLTR Stock Sinks on U.S. Army Contract Concerns
DiPalma believes that there is brewing “friction” between Palantir and the U.S. Army over data ownership issues. That has led the analyst to believe that the U.S. Army will provide the company with a two-year contract that will eventually be less than the $116 million annual run rate the company is currently receiving, due to the U.S. Army hiring other vendors in replacement.
In response, Palantir Head of Global Communications Lisa Gordon stated:
“There is no data ownership conflict between Palantir and the Army, on Army Vantage or elsewhere. Palantir does not have or retain any ownership rights to customer data, across any of our Government or Commercial customers.”
DiPalma carries an “underperform” rating on PLTR stock, attributing a high 125x multiple in comparison to estimated 2023 free cash flow. He believes that this multiple could drop to as low as the mid-30s over the next 12 months due to contract competition.
DiPalma is ranked at number 3,068 out of 8,623 analysts tracked by TipRanks. He has a 58% success rate with an average 12-month return of 2.80%.
Meanwhile, three Palantir insiders have sold off shares this month. Still, this shouldn’t be a cause for concern, as the sale amount relative to the insider’s prior stakes were very insignificant. The largest sale was from Stephen Cohen, who converted 656,100 Class B shares to 656,100 Class A shares and sold them off. Cohen still owns 12.55 million shares of Class B stock following the sale.
On the date of publication, Eddie Pan did not hold (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 InvestorPlace.com Publishing Guidelines.
