Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Palantir Stock Popped 10% Today

By Rich Smith - Dec 21, 2020 at 5:09PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

U.S. Army renews a contract worth more than 10% of Palantir's revenues.

What happened

Shares of government data-analytics company Palantir ( PLTR -0.95% ) stock shot up to close 9.8% higher Monday after the company announced that the U.S. Army will be exercising an "option" to extend its partnership on the Army Vantage data-analytics platform -- and for even a bit more money than the original contract was worth.

So what

One year ago, the Army hired Palantir to work on Vantage under a potential four-year contract, awarding the company a $110 million contract for the first (or "base") year, with the potential for contract renewals at one year intervals for three years afterwards.

Today, the defense contractor confirmed that the Army is exercising at least the first of these options and awarding Palantir an additional $113.8 million for the work.

Silhouettes of departing helicopters and three weapons-bearing soldiers standing together.

Image source: Getty Images.

Now what

The Army has been using Vantage to "make data-driven decisions in the fight against COVID-19," notes Palantir. With the pandemic still ongoing, it makes sense that the Army would re-up its contract at least for 2020. If the software continues to prove useful, the company could be awarded at least two more option renewals, bringing the total value of the four-year contract to as much as $458 million.

Further renewals after the four-year term would also not be out of the question. All that would require is a new contract award. So Palantir could theoretically be looking at an even longer revenue stream. But even absent such an extension, today's news secures for Palantir a significant chunk of its total revenue stream -- $1 billion over the past 12 months, according to data from S&P Global Market Intelligence -- that could have ended at the end of this year.

Now investors can rest certain that it will at least continue, if not grow, through the new year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Palantir Technologies Inc. Stock Quote
Palantir Technologies Inc.
$18.80 (-0.95%) $0.18

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/07/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.