What happened
Shares of Palantir Technologies (PLTR -0.23%) popped higher on Thursday morning, defying the general market downturn. The stock jumped as much as 4.9% but was up about 1.4% as of 3:12 p.m. ET -- even as the three major indexes got crushed, as the S&P 500 and the Nasdaq Composite plunged 2.6% and 3.5%, respectively.
The catalyst that sent the machine learning software and data mining specialist higher was news the company will continue its work with the U.S. Army on several fronts.
So what
First, Palantir announced that its contract with the U.S. Army Research Laboratory has been extended. The company's work will "support all branches of the Armed Services, Joint Staff, and Special Forces as they test, utilize, and scale artificial intelligence and machine learning capabilities across the Department of Defense." The one-year contract extension is worth $229 million.
Furthermore, Palantir will join BigBear.ai (BBAI -1.17%) in implementing the Global Force Information Management System, the Army's enterprise-wide intelligent automation platform that provide leadership with a "holistic view of its global force structure," helping the service "man, equip, train, ready, and resource the Army more effectively." The nine-month contract is valued at $14.8 million, but since BigBear is the primary contractor, Palantir's cut of the proceedings isn't immediately clear.
Now what
Palantir has a long history of partnering with U.S. government and military agencies to deploy software and data mining solutions, so these latest contract announcements aren't too much of a surprise. However, the key to Palantir's long-term success will be the expansion of its commercial business, which is currently being buffeted by macroeconomic headwinds.
The stock has never been cheap, and even after the stock's recession-induced 70% decline, Palantir Technologies valuation is still a bit frothy, selling at roughly 9 times this year's sales. Some would argue that its price-to-sales ratio is too high for a company that expects to grow its revenue by 24% this year. On the other hand, Palantir's outlook doesn't include any new government contracts, so given this new business, its forecast is likely conservative.
