A U.S. Army presentation last week doesn’t seem to bode well Palantir (NYSE:PLTR).
At an industry event at Fort Belvoir, Virginia, U.S. Army officials unveiled plans for an overhaul of the Army Data Platform (formerly known as the Vantage dashboard). Louie DiPalma, an analyst at William Blair, takes notes and says the comments suggest there are tensions with Palantir, Vantage’s current prime contractor.
Palantir’s 4-year, $458 million contract, which began in December 2019, is up for renewal in less than two weeks. However, comments from Brian Raftery, Army Data and Analytics Platforms (ARDAP) project manager for the U.S. Army’s PEO EIS, suggested data ownership conflicts with the current provider and that a change could “cause some unrest.”
Raftery is quoted as saying that the “capabilities we need may cause some consternation,” adding, “What we don’t want is for your innovation, when it touches our data, to become property to you.” I maintain that all data generated by the Army is Army data.”
Since Palantir is the sole commercial software provider for Vantage, DiPalma reads between the lines and says he “feels like he’s alluding to Palantir’s commercial intellectual property licensing model.”
The possible Army conflict arises from Palantir’s approach to selling commercial software licenses to the Army. This leads to intellectual property (IP) concerns regarding ownership of data within the software and the possibility of vendor lock-in pricing dynamics when changes are made to the project scope. “This issue is unique to Palantir’s business model,” the analyst notes.
The tone of the comments and strategy to “maximize the use of open source providers” strongly suggest that Palantir’s extension deal in two weeks will likely be significantly lower than the original $458 million agreement. Additionally, the $116 million annual run rate is “likely to be significantly reduced” as more providers join over the next few years.
Bottom line, DiPalma rates PLTR’s shares an Underperform (i.e. Sell) without providing a firm price target. (To view DiPalma’s track record, click here)
Other Street analysts do have an idea of where the stock price will go, and their assessment also offers no comfort. The average target is $15.18, which means PLTR shares will lose about 18% in value over the next year. Overall, the stock receives a Hold consensus rating based on a fairly even mix of 4 Buys, 5 Holds, and 5 Sells. (See Palantir stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important to do your own analysis before investing.