What Happened: Shares of data-mining and analytics company Palantir (NYSE:PLTR) jumped 5.23% in the morning session after the announcement that it secured a $250 million firm-fixed-price contract earmarked for research and development efforts in artificial intelligence (AI) and machine learning (ML).
The Army Contracting Command, based in Aberdeen Proving Ground, Maryland, will oversee the contracting activity, with the contract expected to be completed by September 25, 2026.
Is now the time to buy Palantir? Find out by reading the original article on StockStory.
What is the market telling us: Palantir's shares are very volatile and over the last year have had 43 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 27 days ago, when the company dropped 5.27% on the news that Morgan Stanley analyst Keith Weiss downgraded the stock's rating from Equal-Weight (Hold) to Underweight (Sell) with a $9 price target. The price target implied a potential 45% downside from where shares were traded when the downgrade was announced. This action was driven by concerns surrounding the near-term outlook of Palantir's AI products, and a valuation premium that poses an unfavorable risk-reward. Weiss added that visibility into the new Artificial Intelligence Platform (AIP) remained low, raising worries regarding the government segment's ability to offset a potential decline in revenues, as estimates have baked in a growth acceleration in the second half of the year.
It is worth recalling that, during the Q2'2023 earnings call, management provided some insights into the progress made so far on the new AI platform, stating, "We have no problem monetizing. We make $2.9 million per commercial customer across the world. We will figure out how to monetize it. First, we're teaching the market what it is. We're getting people on Board."
Weiss's downgrade shows that Morgan Stanley thinks there is too much good news priced into the stock with regards to Palantir's AI prospects without enough concrete evidence. This is a major flashpoint in the markets today as investors debate how large the AI opportunity will be, when it will be realized, and who the true winners and beneficiaries are.
Palantir is up 133% since the beginning of the year, but at $14.87 per share it is still trading 25.6% below its 52-week high of $19.99 from July 2023. Investors who bought $1,000 worth of Palantir's shares at the IPO in September 2020 would now be looking at an investment worth $1,570.
