Palantir (NYSE: PLTR), a software-as-a-service (SaaS) provider specializing in big data integration and analytics, is virtually flat for the year as the stock experiences periods of exceptional gains followed by lows extended.
Nonetheless, the Palantir bulls have received a whiff of good news in the past few hours which has played a big role in propelling the title higher. At the time of writing, Palantir shares are up over 8% in pre-market trading.
Namely, Palantir has now been selected by the U.S. Army Program Manager for Intelligence and Analysis Systems to deliver “An operating system for defense decision making”. The operating system would be built on Palantir’s Gotham platform and would serve to aggregate data from “disparate sources”. If the final testing of the project goes smoothly, Palantir is expected to earn $ 823 million in revenue from the award of this contract.
To cool off, Palantir currently offers three main products. Its Gotham service integrates and transforms data of any type or volume into a single, cohesive data asset. Additionally, the company’s Foundry service removes barriers between back-end data management and front-end data analysis, providing an integrated approach to interpreting large data sets. Finally, the Apollo software solution powers Palantir’s Gotham and Foundry SaaS services in the cloud.
While this US Army contract award currently provides a much-needed upward push for Palantir’s shares, readers should note that the stock is not yet out of the woods.
First, Palantir is now at risk of losing one of its most lucrative contracts as US Immigration and Customs Enforcement (ICE) seeks to replace FALCON – a surveillance program designed by Palantir on its Gotham platform and used by ICE to coordinate and organize its raids – with a new program called RAVEn, a bespoke tool that tech giants like Amazon, Microsoft, IBM and Google, along with hundreds of other companies, are working to develop . In the same vein, the agency is expected to announce soon contracts of up to $ 300 million for the RAVEn program. Keep in mind that Palantir made between $ 84 and $ 111 million from the FALCON program. If the company failed to become a RAVEn partner, it would lose one of its most lucrative sources of income.
Clouds are also gathering for Palantir’s actions on the macroeconomic front. While the Federal Reserve is expected to largely begin cutting its quantitative easing (QE) facility by next month, heralding an upward trajectory for Treasury yields, growth stocks – particularly long-lived ones – are likely to suffer. For context, high duration stocks are those that offer a low dividend yield. As Treasury yields rise, the opportunity costs associated with holding long duration stocks also increase, creating an incentive for investors to shy away from those stocks.
Of course, the next big catalyst for Palantir’s bulls would come in the form of the company’s third quarter 2021 earnings, currently slated for November 18.