Palantir’ Stock Price Is at Risk As Government Contract Wins Slow

The Palantir Technologies Inc (NYSE: PLTR) stock price faces a significant threat in the form of dwindling government contracts as privacy concerns mount. The company is already losing contracts in Europe after Germany’s Federal Constitutional Court ruled against Hesse and Hamburg.

The ruling bars police officers from performing automated data analysis, which could wrongly profile innocent civilians connected to criminals by being relatives, neighbours or similar connections. Many German states are reconsidering using Palantir’s software, given the public’s misgivings about police surveillance.

Palantir has a different problem in the United States, which is the emergence of many competitors for the government contracts that it has dominated in the past. 

For example, Space Systems Command’s Battle Management Command, Control and Communications (BMC3) Program Executive Office just awarded a $900 million Indefinite Delivery/Indefinite Quantity (IDIQ) contract to 18 contractors, including Palantir, to provide Data Software Services directly supporting warfighter needs.

The US military, which is Palantir’s largest customer, seems keen to spread its data contracts among numerous companies to avoid being over-reliant on one supplier, which in most cases has been Palantir. 

In the past, Palantir could have been awarded the data services contract by the Los Angeles Air Force Base without having to split it with 17 other vendors. If the situation is repeated across other military branches, we could witness a significant decline in Palantir’s revenues. 

Last Tuesday, Space Systems Command, Los Angeles Air Force Base, awarded Palantir a three-month bridge extension instead of renewing the long-term Space Force data software services contract, the company’s third-largest contract. 

Louie DiPalma, an analyst at William Blair, told investors in a research note on Friday that the award of the $900 million data services contract to 18 vendors could limit Palantir’s revenues from the project since the new contracts built on a system that was solely sourced from Palantir. 

The company has an impressive roster of clients, including the CIA, which uses its data services to predict and thwart crimes locally and abroad. DiPalma noted that there is a risk that the US military will continue migrating from Palantir systems to multi-sourced systems. 

For example, the Air Military Command has migrated its Raven program from Palantir’s data systems, and the FDA's CDER program is doing the same. 

*This is not investment advice. 

Palantir stock price. 

The Palantir stock price was trading flat premarket as investors barely reacted to the split contract.