An unexpected winner of the last year has been Palantir Technologies Inc (NYSE:), a company with a fairly unique prospect in the big data analytics stakes. While there have been some who doubt the company's ability to carry on in the current market, and those who look askance at the company's current share price and wonder how that can stay aloft, a recent deal for the company suggests that there are indeed possibilities afoot and reasons to buy in.
One Major New Government Contract
The biggest news for Palantir of late is that it landed a new contract with the Food and Drug Administration (FDA). Worth a surprisingly even $44.4 million, the contract called for Palantir to supply its systems to give the FDA an edge in establishing drug review processes and inspection measures.
This latest contract is just one of several the company has with the government, and after the contract was announced late yesterday, the company found its shares up over 21%. It's given back many of those gains since, and is currently trading below its yesterday close of $28.94. Previous government contracts the company has one include a $36 million arrangement with the National Institutes of Health and a $91 million contract with the US Army. Additionally, the company also booked a renewed contract with a customer in the aerospace sector, which provided an extra $300 million for the company.
With Palantir looking like it could post a return of over 1,300% for its first year by some measures—it's already up over 230% since its initial public offering (IPO) in late September—it's a company that's drawing a lot of interest. The level of interest, however, depends on who you ask.
A Slipping Analyst Profile
Make no mistake, there's a lot of interest in Palantir as a whole. Our latest research shows that the company has been both frequently searched and regularly followed by potential investors, but the analyst community is a little split on the topic.
In fact, there are signs of growing concern as far as Palantir's ability to survive goes. A month ago, the company had four “hold” ratings and two “buy” ratings, which meant a consensus rating of “hold”. A month later—remember, the company has only been available to buy since October for most investors—that rating slipped to one “sell” rating, four “hold” and one “buy.” The price target has increased, but is well below the company's current selling price; it sits at $13.50, and a month ago, it was $11.33. Either figure is less than half the company's current share price as of this writing.
A Slow Grower or a Slow Dyer?
For the many who watched the movie “The Shawshank Redemption,” one line likely comes back to them: “Get busy livin', or get busy dyin'.” Palantir looks to be defying this maxim, as it lives, but rather slowly.
Palantir's success in pulling in contracts has one unexpected benefit: transparency into future developments. With contracts in place, there's a certain clarity to the company's near-term future; we have at least some idea how much the company is poised to bring in over the life of those contracts. While we don't know how many more such contracts the company can pull, we do know that it has those contracts, and therefore, that income. We also know that the company has a wonderful profitability equation; some analysts note that the company's capital expenditures are around 1% of total revenue. That means the company can potentially run very lightly and generate some impressive profit numbers.
Additionally, we know that Palantir is operating in a market space that's going to have a lot of demand in the future. The company's focus on big data analytics makes it prime ground for future growth, because businesses all up and down the continuum want access to big data's incredible line of benefits, yet don't have the expertise to develop their own big data tools. All it takes is for Palantir to roll out one really user-friendly platform and get regular users on board to make it quite possibly the next Amazon (NASDAQ:) (NASDAQ:AMZN).
It's clear Palantir has some future. The contracts make that a lock. Just how far the company can go depends on several factors, but it has a fairly major stake in a market that should have a lot of room for growth. With share prices still in the “nice dinner for one” range, it might be worth picking some up just to have a stake in what may be the biggest thing in big data to come along for years
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