Palantir (NASDAQ:PLTR) stock rose 9% overnight after it won a U.S. Army contract for missile targeting.
The $178 million contract is for the Tactical Intelligence Targeting Access Node (TITAN) program, which are mobile ground stations powered by artificial intelligence (AI) and machine learning technology.
Palantir was at $26 per share during pre-market trading today. In that time, it gained nearly $5 billion in market capitalization, to $57 billion. Palantir had revenue of $2.25 billion in 2023.
Expanding the Niche, Sir!
Palantir’s first aim was always to become a dominant military contractor. The TITAN win shows that the goal is within reach.
The problem for investors is that defense contractors grow slowly, usually in line with defense budgets. Companies like General Dynamics (NYSE:GD), Lockheed Martin (NYSE:LMT) and Northrup Grumman (NYSE:NOC) carry low multiples but sizable dividends, although they do benefit from war fears.
Palantir has a different profile. It’s a tech stock on the leading edge of artificial intelligence from which investors seek capital gains. Palantir is up 185% over the last year, but that’s on sales growth of just 18%.
Thus, it’s civilian and corporate contracts that should move the needle on PLTR stock. Analysts are down on the stock, with five of 13 at Tipranks telling investors to sell it. Retail investors at Stocktwits, in contrast, love the stock, one noting that the current TITAN award is just for 10 prototypes, and much bigger contracts will come in 2026.
There are reasons to believe Palantir can achieve commercial success. Carahsoft is helping the company reach civilian agencies through the General Services Administration (GSA). Palantir said in its recent earnings release that its commercial revenue grew by 32% in 2023 to $284 million, while government revenue grew just 11%.
PLTR Stock: What Happens Next?
Expect a sharp rise in PLTR at the open. But it’s the commercial accounts that will prove the stock as an investment.
On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
