There’s Good news on the horizon for Palantir (PLTR) investors. According to William Blair’s Kamil Mielczarek, the investment firm’s Dotted Line tracker shows the big data specialist has been awarded a $90 million/four-year contract to provide the Department of Veterans Affairs (the VA) with its Foundry software. The analyst thinks an announcement should be made this week.
However, investors shouldn’t get too excited as that is about where the good news ends. While Mielczarek naturally calls this new contract a “positive,” as far as the analyst is aware, it was Palantir’s “only significant new government contract in the September quarter.”
“We do not believe Palantir’s recent bookings are sufficient to prevent Palantir’s government revenue growth rate from rapidly decelerating over the next year,” the analyst went on to forlornly say.
Mielczarek estimates that in Q3 (September quarter), on a duration-adjusted basis, Palantir won government contracts worth $61 million, way beneath the $107 million it made from this channel in the same period last year.
Generally, compared to its Department of Defense contracts, the company’s civil government contracts have been “relatively small.” However, new U.S. DoD contracts wins have been scant, the “dry spell” resulting in just one new work contract over the past year; on the DoD contracts page, the Space Force contract comes up as the only one awarded during the period.
The bearish case for Palantir has always revolved around its dependance on huge government contracts, as unlike many of its data analytics peers, its commercial division hasn’t been able to generate the same kind of “hypergrowth.” Mielczarek says the new sales strategy is “showing potential,” but it is too early to bet on its success. And with a fourth consecutive quarter of Government backlog “approximately flat” at $1.3 billion, the signs are somewhat ominous.
“We see risk that like several peers, Palantir could be negatively impacted by federal contracts slipping forward,” the analyst summed up.
To this end, Mielczarek maintains an Underperform (i.e., Sell) rating for PLTR stock with no fixed price target in mind for the shares. (To watch Mielczarek’s track record, click here)
According to the rest of the Street, shares are currently trading at their fair value, with the $24 average target suggesting the stock will stay range-bound for the foreseeable future. Rating wise, the bears are in control; the stock’s Moderate Sell consensus rating is based on 3 Sells, 2 Holds and 1 solitary Buy. (See Palantir stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
