Somewhat over 10 years in the past, I had a curious encounter on the metro in Washington, D.C., that ended up altering my life.
Whereas mindlessly scrolling on my iPhone to move the time, I seen a person cruising on his laptop computer within the seat throughout from me. He was sporting a black winter beanie that stated “Palantir” on it. Interested in what it might imply, I went onto Google and looked for Palantir.
Unbeknownst to me, Palantir Applied sciences (NYSE: PLTR) was a knowledge analytics software program developer specializing in protection expertise for the U.S. navy. From that second on, I continued monitoring Palantir through the years and was notably excited when the corporate lastly went public again in late 2020.
Quick-forward just a few years, and now Palantir has emerged as a serious power inside the artificial intelligence (AI) realm. Beneath, I will break down how AI is making waves within the protection sector and why I see Palantir as a no brainer inventory to observe because the navy doubles down on protection tech.
Why is protection tech such an enormous deal?
In the case of AI, you in all probability take into consideration functions associated to office productiveness, robotics, and even drug discovery capabilities. The refined factor about use instances like these is that they are typically seen in a constructive gentle. In different phrases, individuals take pleasure in speaking about them and subsequently they find yourself getting a number of protection.
The protection business is totally different. Whereas it is fairly well-known that authorities contracting is a gigantic enterprise, I feel it is truthful to say that most individuals attempt to chorus from speaking in regards to the enterprise facet of the navy. However the reality of the matter is that the federal authorities (together with the Pentagon) has most of the similar wants and ache factors as a non-public company. Similar to any group, protection companies hold monitor of budgets, endure lengthy and strict procurement processes, and have to watch issues akin to headcount and stock.
Throughout occasions of geopolitical unrest, the significance of cybersecurity and information evaluation turns into much more pronounced — because it’s mission-critical to supply the instruments required to make knowledgeable selections shortly and effectively. And that is the place Palantir enters the image.
Picture supply: Getty Photographs.
One other large win for Palantir
Throughout a lot of 2024, Palantir has quietly introduced quite a few huge contract wins with the Department of Defense (DOD). Megacap tech behemoths Amazon and Microsoft have seen Palantir’s robust presence throughout the protection sector, and each corporations have built-in Palantir’s Synthetic Intelligence Platform (AIP) with their respective cloud infrastructures, Azure and Amazon Net Companies (AWS). These partnerships are centered on enhancing safety protocols throughout the DOD.
However in early November, Palantir might have simply secured its most profitable win but with the navy. Based on public data, the Naval Data Warfare Heart (NIWC) seems to be awarding Palantir with a contract price almost $1 billion. The discharge says the Division of the Navy “intends to award a contract on a sole-source foundation to Palantir.” The deal is for 5 years and has an estimated worth of $920 million.
Picture supply: Palantir Investor Relations.
Palantir’s U.S. authorities income is already rising 40% yr over yr and generates greater than $1 billion of income per yr. Now, it seems the corporate primarily simply doubled its base of U.S. authorities income due to the NIWC deal.
Is Palantir inventory a purchase proper now?
Whereas I’m pumped about Palantir’s progress within the protection tech panorama, I’ve to say that this NIWC is just not cause alone to purchase the inventory hand over fist. Palantir’s price-to-sales (P/S) a number of of 54.2 is abnormally excessive, and tendencies recommend the inventory has skilled some pronounced valuation expansion in current intervals.
PLTR PS Ratio information by YCharts
Though I feel shares have grow to be overbought and the inventory is simply too expensive to purchase proper now, the larger thought is that AI is an evolving theme within the navy. To me, Palantir seems nicely positioned to maintain penetrating this house and I’m optimistic that the corporate will stay an vital participant for AI-powered protection capabilities.
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*Inventory Advisor returns as of November 11, 2024
John Mackey, former CEO of Complete Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Adam Spatacco has positions in Amazon, Microsoft, and Palantir Applied sciences. The Motley Idiot has positions in and recommends Amazon, Microsoft, and Palantir Applied sciences. The Motley Idiot recommends the next choices: lengthy January 2026 $395 calls on Microsoft and brief January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.
