Three year contract
Palantir Technologies (PLTR) shares, which have increased by more than 200% since they were released on the NYSE on 30 September, rose by 21.34% on Monday amid the news of a major new government order.
Palantir, founded in 2003 by Peter Thiel (co-founder of PayPal) and Joe Lonsdale, offers software for the collection and analysis of large volumes of data to identify important patterns and make informed decisions.
Half of Palantir's clients are government entities and the company has won dozens of major contracts, gaining credibility. According to media reports, Palantir's most recent win was a three-year $44.4 million contract with the FDA Centre for Drug Evaluation and Research and the Centre of Excellence in Oncology. The Palantir software will be used in the drug approval process, possibly including coronavirus treatment.
In October, Palantir announced that its software will help the federal government establish a system that will track the production, distribution and use of Covid-19 vaccines among 300 million Americans as part of Operation Warp Speed.
Government contracts account for more than half of Palantir's revenue and have brought in $163 million in the last quarter. In November, Palantir announced that its latest contracts were: a deal with the US Army, a contract with the National Institutes of Health and a $300 million contract renewal with an aerospace customer.
Although the company reported an increasing loss for the quarter ended September, it raised its revenue growth forecast for 2020 to 43.5% to $1.07 billion. Palantir also raised its operating profit forecast for 2020 from $130 million to $136 million.
One expert noted that Palantir has well predictable fixed income as its average contract term is 3.5 years.
In addition, Palantir has a minimum capital expenditure requirement of just 1% of its revenue. This provides a good basis for the company to continuously increase profits with stable revenue growth.