What happened
Shares of big data-for-defense company Palantir Technologies (PLTR 4.29%) soared in Thursday trading after the defense contractor announced that the U.S. Space Systems Command -- a division of the U.S. Space Force -- has awarded it a big follow-on contract for Battle Management Command, Control, and Communications (BMC3).
Palantir stock is up a solid 10% as of 1:20 p.m. ET in response.
Image source: Getty Images.
So what
Palantir says its contract has it providing data-as-a-service (DaaS) to the U.S. Air Force, Space Force, and NORAD-NORTHCOM (North American Aerospace Defense Command and the U.S. Northern Command), helping "to integrate, clean, share, and leverage data to help make decisions on personnel management, strategic and operational planning, cross-space situational awareness, and collaboration across combatant commands."
Originally awarded a contract for this work back in 2021, with a value of $121.5 million, Palantir has now been awarded an additional $53.9 million to continue work on BMC3 through March 2023. In total, the contract is now worth $175.4 million.
Now what
Don't get me wrong. This amount -- $175.4 million -- is a decent chunk of change, even if only $53.9 million of this money is actually "new" news. I'm just not convinced that adding $54 million-ish to Palantir's revenue stream is big enough news to justify the $1.5 billion that investors have added to Palantir's market capitalization today because of the new revenues, especially not when those revenues are currently earning Palantir an operating profit margin of negative 20%!
Granted, one can argue that Palantir winning a follow-on contract here implies more wins may follow in future years. Granted, those contracts, too, may add tens of millions of dollars each to Palantir's revenue stream.
But unless and until Palantir proves that it's capable of turning these revenues into profit, it doesn't matter how fast the company is growing those revenues. I'm not investing in it.
