Palantir Technologies has been one of this year’s standout technology stocks. However, customer concerns over data ownership could limit the analytics-software company’s future gains, according to William Blair analysts.
The worries for Palantir were highlighted by a presentation given by U.S. Army officials last week. Comments made in the presentation suggested there might be friction between the Army and Palantir over data ownership as part of the company’s four-year $458 million contract for the Army Data Platform, previously known as Vantage, according to William Blair analyst Louie DiPalma. That contract started in December 2019 and is set to end within weeks.
“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,” wrote DiPalma in a research note.
DiPalma said it seemed likely the Army would give Palantir a two-year contract and build a future system with multiple vendors, thus reducing its $116 million-per year revenue stream over the medium term.
Palantir’s head of global communications Lisa Gordon said in an emailed statement that the company was concerned with inaccuracies in the William Blair note.
“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,” Gordon said.
While the William Blair analysis focuses on a single contract, Palantir is highly exposed to federal government contracts and is known for its defense and intelligence work.
William Blair’s DiPalma has an Underperform rating on Palantir stock, noting shares currently trade at 125 times its forecast 2023 free cash flow and arguing there is potential for that to compress to a mid-30s multiple. Its shares have soared this year on excitement over how artificial intelligence could boost the company’s business
“Over the next 12 months, we expect Palantir’s multiple to compress as a result of competitive pressures for new defense contracts,” DiPalma wrote.
Palantir stock was down 1.5% in premarket trading on Tuesday at $18.12 after falling 9.2% on Monday. The stock, has nearly tripled this year so far.
Write to Adam Clark at [email protected]
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