What Happened:
Shares of data-mining and analytics company Palantir (NYSE:PLTR) jumped 9.1% in the pre-market session after the company announced that it had been awarded a $178.4 million contract by the Army Contracting Command – Aberdeen Proving Ground for the development and delivery of the Tactical Intelligence Targeting Access Node (TITAN) ground station system. According to the press release, the agreement covered the development of "10 TITAN prototypes, including five Advanced and five Basic variants. The system is expected to have AI and machine learning capabilities to "enhance mission command and long-range precision fires by providing actionable targeting information sourced from various sensors."
Overall, the announcement highlights the growing demand for Palantir's artificial intelligence platform and the strength of its capabilities within the government vertical.
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What is the market telling us:
Palantir's shares are very volatile and over the last year have had 39 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 28 days ago, when the company gained 8.8% after sustained momentum following the company's strong earnings results, which highlighted the growing demand for its AI solutions.
In addition, the major indices advanced, with the S&P 500 set to cross 5,000 points for the first time. The earnings season started strong, with positive reports from tech giants including Microsoft, Amazon, and Meta. These encouraging prints are expected to help sustain growing optimism stemming from the expectations for positive gains in 2024, especially for AI-related stocks. Also, there are hopes that the Fed will begin cutting rates in the first half of 2024, which should help ease business conditions.
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.
Palantir is up 56.2% since the beginning of the year. Investors who bought $1,000 worth of Palantir's shares at the IPO in September 2020 would now be looking at an investment worth $2,727.
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