💻 Will Palantir Emerge From The Shadows?

General Motors' 2030 plan; Levi's optimism.

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💻 Palantir: Dark Knight Rising?

The US Army has selected Palantir Technologies Inc. (PLTR) for the indefinite-delivery, indefinite-quantity (IDIQ) contract worth $823M. For the notoriously secretive company that it is, the deal win may just be the boost that its struggling stock price needs. (Tweet This)

Where Are The Details?

Palantir should have become the darling of the market since listing last September. Although it’s not yet profitable, Palantir works with some of the marquee names out there as customers, a trendy tech company with solid revenue growth and positive cash flow.

But there ends the level of detail. Since these marquee names are the CIA, the Department of State, the Pentagon, and several other federal agencies, barely any details are available as to the company’s projects under the national security garb. The company is making an effort to diversify and serve private corporations as well.

Yesterday, Palantir was selected for a US Army Intelligence program to deploy its Gotham platform for facilitating defence decision-making. While Gotham was its first product, specifically meant for defence and intelligence use. Its corporate clients use a different software called Foundry. The company has clients in over 150 countries.

The US has traditionally had the most powerful army and the most sophisticated weaponry. However, other countries have started posing a more imminent threat as they ramp up their own defense readiness (such as China and Russia). Such players who are coming ever closer to the incumbent are called “near-peer threats” in defense speak.

The US Army is looking to leverage Gotham to modernize its data and be able to better assess and respond to threats in close-to-real-time. This order win adds more flesh to the company’s Total Contract Value, which grew 175% Year-on-Year in Q2 to $925M.

The Investors’ Boogeyman?

In Q2, revenue grew 49% Y-o-Y to $376M, but losses persisted. Even so, the company expects to double its full-year adjusted free cash flow in 2021 to $300M. On paper, it seems it’s just a matter of time before the company turns profitable.

Reality might be a bit different. There are persistent worries that the government continues to be a significant contributor to revenues. And Palantir hasn’t bothered to assuage those concerns. If anything, the government is now a more substantial part of the revenue base (62% in Q2 Vs. 61% in Q1).

The government business revenue grew 66% Y-o-Y compared to the commercial segment’s top-line growth of 28%. While these developments are what they are, the company has been courting controversy in its projects as well.

There are allegations that Palantir is aiding Immigrations and Customs Enforcement (ICE) with its deportation program. By tracking Covid-19 cases and sharing this data with ICE, it is believed that Palantir is helping pinpoint where undocumented immigrants might be.

The company has also refused to provide a timeline and a path to profitability. The management has effectively said that profitability is not their immediate priority. With the situation on the ground being what it is, will another contract from the US Army be something that’ll necessarily cheer the investors, given all the other issues that are already obscure for the most part?

That explains why the stock price has gone nowhere during the year. As of now, investors can only hope Silicon Valley’s dark knight emerges from the shadows and into the limelight, both in terms of bagging new business that weans it away from the government, as well as comes clean on some of the more controversial programs its part of.

That’s easier said than done, at least as things stand now.

Market Reaction
PLTR ended at $23.58, up 1.59%. Shares are up 1% this year.

Company Snapshot 📈

PLTR $23.58 +0.37 (1.59%)

Analyst Ratings (08 Analysts) BUY 13%  HOLD 50%  SELL 37%

Newsworthy 📰

Plan: General Motors says it will double annual revenue by 2030 to $280B in digital push (GM -0.75%)

Strong: Levi Strauss earnings beat as new denim styles drive sales growth, retailer raises outlook (LEVI +3.71%)

Case: Amazon sued by warehouse workers over Covid-19 screening pay (AMZN +1.27%)

Later Today 🕒

  • Conagra Brands Inc. Earnings (CAG)
  • Tilray Inc. Earnings (TLRY)
  • Tesla Inc. Annual General Meeting (TSLA)
  • 6:00 PM IST: Initial Jobless Claims
  • 10:30 PM IST: Consumer Credit Data

Today’s Market Terminology: Shares Outstanding

Shares outstanding are all the shares of a corporation that have been authorized, issued and purchased by investors and are held by them. They are different from treasury shares

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