STOCK NOW William Blair Sounds the Alarm on Palantir Stock

William Blair Sounds the Alarm on Palantir Stock

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A U.S. Army presentation made last week does not appear to bode very well for Palantir (NYSE:PLTR).

At an industry event at Fort Belvoir, Virginia, U.S. Army officials set out plans for a revamp of the Army Data Platform (what used to be known as the Vantage dashboard). Taking notes, William Blair analyst Louie DiPalma says the comments suggest “brewing friction” with Palantir, the present Vantage 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 made by Brian Raftery, the U.S. Army’s PEO EIS’s Army Data and Analytics Platforms’ (ARDAP) project manager, alluded to conflicts around data ownership with its current vendor and how a change could “ruffle some feathers.”

Raftery is quoted as saying the “capabilities that we need might cause some consternation” adding that “what we don’t want is when your innovation touches our data then it becomes proprietary to you. My contention is that all data generated by the Army is Army data.”

As Palantir is the sole commercial software provider for Vantage, reading between the lines, DiPalma says he is “under the impression that he is alluding to Palantir’s commercial licensing IP model.”

The possible Army conflict stems from Palantir’s approach to selling commercial software licenses to the Army. This gives rise to intellectual property (IP) concerns regarding the ownership of data within the software and the potential for vendor lock-in pricing dynamics when there are modifications to the scope of the project. “This problem is unique to Palantir’s business model,” notes the analyst.

The comments’ tone and the strategy to “maximize the use of open-source vendors” strongly suggest that Palantir’s renewal contract in two weeks will likely be considerably lower than the initial $458 million agreement. Additionally, as other vendors are “added to the fold,” over the next few years, the $116 million annual run-rate will “likely be significantly downsized.”

Bottom-line, DiPalma rates PLTR shares an Underperform (i.e., Sell) without providing a fixed price target. (To watch DiPalma’s track record, click here)

Other Street analysts do have an idea about where the share price is heading and their take does not offer comfort, either. The average target stands at $15.18, implying PLTR shares will shed ~18% of value over the next year. All in all, the stock claims 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 intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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