3 new catalysts for Palantir’s high-end stock
Palantir‘s (NYSE: PLTR) the stock has roughly tripled in price since its direct listing three months ago. Interest in shares of the data mining company was initially lukewarm due to its controversial business model, heavy reliance on government contracts, lack of profits, and ongoing insider sales. .
However, Palantir’s third quarter earnings report in November – which featured accelerating revenue growth, increased gross margins, new government contracts and company renewals – drew a bull rush.
Palantir’s stock is now trading at nearly 40 times next year’s sales, and some analysts warn the stock could be too much hot to handle. This caution is warranted, but three recent developments have kept the bulls engaged over the past month.
1. A three-year contract with the FDA
On December 8, Palantir said the US Food and Drug Administration (FDA) awarded him a new three-year contract worth $ 44.4 million. Palantir already provides services to the FDA, but the new contract represents its largest contract with the agency.
Palantir will provide enterprise data management and analysis solutions for the Center for Drug Evaluation and Research (CDER) and the Center of Excellence in Oncology (OCE), which will be used to render “the information. more accessible, governable and secure reviews “as centers” to assess the safety and efficacy of drugs and to regulate the industry.
Palantir says its platform, which “breaks information silos and allows end users to see new connections and information from data,” will help CDER and OCE “fill gaps in their computing capabilities current “to support testing and regulations for new drugs.
2. The pursuit of a multi-year contract with the Army
On December 21, Palantir stated that the The American army would run the second year of a pre-existing partnership that started a year ago.
Last December, Palantir signed a deal with the military that could be worth up to $ 458 million over the next four years, including a base year and three option years. The base year, which just ended, was $ 110 million. The second year, which has just been renewed, is worth $ 113.8 million.
Palantir’s platform powers Army Vantage, an analytics platform that brings together data from disparate sources to make data-driven decisions. The platform has been used to make decisions in the fight against COVID-19 over the past year and received a public sector government innovation award in November.
The continuation of the deal will strengthen Palantir’s existing relationship with the military, which also includes a recent two-year, $ 91 million contract to bolster its machine learning and artificial intelligence capabilities.
3. A new contract with the UK National Health Service
On December 23, Palantir announced a new two-year contract with the UK’s National Health Service (NHS) to track COVID-19 infections, proactively increase health resources in ’emerging hot spots’ and redirect patients to the most efficient facilities.
The NHS will use Palantir’s platform for businesses, Foundry, instead of the Gotham platform which serves US government agencies. Palantir has not disclosed the exact value of the deal, but the NHS contract says the deal could be worth up to £ 23.5million ($ 31.9million).
The NHS initially partnered with Palantir in March to handle the UK’s COVID-19 data, but that trial deal was only worth a pound ($ 1.36). That deal was set to expire in June, but it was extended for another four months for £ 1million ($ 1.36million). The new two-year agreement expands that partnership and represents a strong vote of confidence in Foundry’s ability to manage the pandemic.
But will these catalysts support the valuation of Palantir?
Palantir expects its revenue to grow by around 44% to $ 1.07 billion this year, and then more than 30% (to over $ 1.39 billion) next year. Analysts expect its revenue to rise 32% to $ 1.41 billion next year.
The new deals with the UK’s FDA, military and NHS could generate around $ 145 million in combined revenue over the next year (around 10% of Palantir’s revenue) if FDA payments are made. spread evenly over the next three years and the NHS pays the highest amount expected. value of his contract.
It’s a significant boost, but Palantir’s management also likely incorporated these three deals – all of which were extensions of their existing partnerships – into their latest directions. Therefore, these partnerships are unlikely to change the fact that Palantir is still an expensive stock.
Nonetheless, Palantir’s latest deals with the FDA and the military will widen his rift against potential challengers in the government sector. Foundry’s deal with the NHS is also expected to broaden Palantir’s reach beyond U.S. government agencies, boost its appeal with corporate clients, and help it gain ground against its business intelligence rivals. As Splunk.
These transactions alone do not justify the valuation of Palantir. But they do indicate that Palantir’s Gotham and Foundry platforms may still have plenty of room to grow – which could continue to lock in the bulls and support its high-flying stock.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.