TheStreet Pro’s Stephen Guilfoyle is thinking of a company.
This group has a large and growing position in defense contracting as well as plenty of corporate clients.
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And the company’s shares were climbing recently even as other names in the Dow Jones U.S. Defense Index, such as Kratos (KTOS) , Northrop Grumman (NOC) , L3Harris (LHX) and Lockheed Martin (LMT) , were falling.
“They don’t sell hardware,” the veteran trader said in his recent column. “They don’t sell things that go ‘boom.’ They don’t sell flying machines, machines that swim or tracked vehicles. They sell intelligence. They sell gig-data driven, AI-supported, game-changing analysis.”
Related: As Palantir stock soars, veteran trader makes surprising call
Which company are we talking about here?
“I speak, of course, of Palantir Technologies (PLTR) ,” Guilfoyle said, referring to the data-analytics software producer. “In this environment, it has become possibly America’s most important defense contractor.”
Wall Street veteran cites NATO summit
Guilfoyle, whose career dates back to the floor of the New York Stock Exchange in the 1980s, noted that at the recent NATO summit, leaders of the security alliance committed to invest 5% of GDP annually on defense and security-related matters by 2035.
Spain reached a deal with NATO to be excluded from the spending target and will spend 2.1% of GDP.
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“It was a little less than eight years ago that President Trump could not get the majority of these nations to pay their fair share,” Guilfoyle said. “Whatever actually comes out of this summit, on top of the increase in spending on defense, I am sure there will be some increased orders for the industrial hardware of conventional warfare.”
While those outlays will buy tanks, artillery, aircraft, naval craft, missiles and missile defense technology, he said, “this plays straight into the hands of a firm like Palantir.”
“For nations strapped fiscally, looking for the most bang for their buck, or euro, the purchase of software-driven big-data platforms capable of providing accurate analysis and actionable intelligence may just be the best way to upspend on defense,” Guilfoyle said.
Several tech companies have benefited from the Trump administration’s return, as it has committed to promoting technological advancement, particularly in areas like artificial intelligence and digital assets,
Shares of Palantir have nearly doubled this year and have soared nearly six times from a year ago. The Denver group has been on the receiving end of lucrative defense contracts.
These include a recently expanded $1.3 billion deal with the U.S. Defense Department for the company’s Maven Smart System and a controversial software contract with Immigration and Customs Enforcement.
Palantir contracts spark controversy
Palantir, which has been an ICE contractor for more than a decade, was recently awarded $30 million to provide the agency with “near real-time visibility” on people self-deporting from the U.S., Wired reported.
In addition, a report by the Project on Government Oversight said White House Deputy Chief of Staff Stephen Miller owned between $100,001 and $250,000 of Palantir stock, raising “conflict of interest concerns.”
Related: Veteran fund manager reboots Palantir stock price target
Meanwhile, a coalition of Democratic Party lawmakers wrote to Palantir CEO Alex Karp after reports said the company was helping the IRS build a searchable, governmentwide megadatabase to house Americans’ sensitive information.
In a response to a New York Times story about its Foundry product being added to four federal agencies, the company said, “Palantir never collects data to unlawfully surveil Americans, and our Foundry platform employs granular security protections.”
Palantir is also expanding its corporate client base, bringing in such diverse names as Heineken (HEINY) , Walgreens Boots Alliance (WBA) and AT&T (T)
“Intelligence is a corporate affair, too,” said Guilfoyle, who raised his price target on Palantir shares to $181 from $156. “The commercial side of what Palantir provides has been growing more quickly than the government side, by a 71% to 45% score.”
He does add that Palantir’s valuation “is absurd unless an actual tsunami of investment growth continues to be made in this kind of analysis and resultant intelligence is made by governments and businesses that consider it a nonnegotiable ‘must-have.'” Guilfoyle said.
Yahoo Finance pegs PLTR’s forward price-to-earnings multiple at 263.
“Then, at what price, survival? The threat — and it will come — to Palantir’s valuation will come from competitive pressure, but that day, in my opinion, is not yet upon us.”
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