Shares of Palantir Technologies (PLTR +2.54%) fell like a rock this week, tumbling as much as 15.4%, according to data provided by S&P Global Market Intelligence. As of 11:59 a.m. ET on Thursday, the stock was still down 14.9%.
The catalyst that sent the artificial intelligence (AI) and data mining specialist lower were concerns raised by a Wall Street analyst.
NASDAQ: PLTR
Key Data Points
A dire warning?
William Blair analyst and recent Palantir bear Louie DiPalma rocked the boat this week when he opined that one of the company's upcoming contract renewals could be disappointing. Palantir has a $458 million contract with the U.S. Army that is up for renewal later this month.
DiPalma suggested there's a "strong indication that Palantir's renewal contract in two weeks will be significantly less than the original $458 million." The analyst went on to speculate that the military contract could be reduced to two years and $116 million, with the total responsibilities being divided up between multiple vendors.
Similar concerns were raised by Barron's, which cited an Army presentation that suggested a disagreement over data ownership had led to a rift.
Here's why the stock is still a buy
It's important to note that the discussions are ongoing, and the contract hasn't yet been renewed. Investors will have to wait until an agreement has been reached between Palantir and the Army, and should refrain from passing judgment until a deal is done.
Palantir has a long and storied history of providing AI and data mining services to the U.S. government and its allies, and the loss or reduction of a contract is something investors should consider. That said, the company has been working to expand its commercial services, which represented 45% of total revenue in Palantir's fiscal 2024 third quarter (ended Sep. 30). Furthermore, its commercial business is growing more quickly, up 23% year over year, compared to government revenue, which grew 12%.
Palantir has been developing AI solutions for more than two decades, and its experience in the field represents a significant competitive advantage. I believe investors should ignore the noise and buy Palantir Technologies stock.
