Since Palantir (NYSE:PLTR) the stock went public via a direct listing, the company’s contracts with the federal government were part of the bearish narrative.
In the United States, we have just celebrated the anniversary of the terrorist attacks of September 11, 2001.
This tragic event marked the start of a “war on terror” that continues today. It is a war in which Palantir took an active part.
One of the benefits of having a company like Palantir involved is that the War on Terror has been waged out of the sight of ordinary Americans for the sake of it. most, but that may change.
Our country’s exit from Afghanistan highlighted what some feared about the patience of global terrorists such as the Taliban. That is, we can have the watches, but they have the time.
This suggests that our country’s efforts to fight terrorism may become more visible again. Is it unreasonable to expect Palantir to benefit from a more visible approach to the fight against terrorism? I do not think so.
There are many reasons why investors find Palantir off-putting. One of them is that a significant percentage of the company’s revenue comes from the federal government. And not just the government, but the military.
What makes investors more nauseous is that Palantir has a business relationship with parts of our government that we would rather ignore. In fact, Palantir was allegedly involved in the search for Osama Bin Laden.
America is hopefully taking the first steps towards normal that we remember. Even as this happens, we will remember that the war on terrorism never really ended. This conflict is about to escalate a notch or three, which means the government will likely turn to Palantir for its expertise in this area.
To this end, Palantir announced to have new offers in place with the US Army, Air Force, Coast Guard. The company also entered into a two-year, $ 100 million contract with the US Special Operations Command.
Private sector growth and Insider selling
Palantir said it expects more than 30% annual revenue growth for the next five years, and the company is exceeding those expectations in 2021.
In its most recent quarter, the company posted 49% year-over-year revenue growth. Fans of free cash flow (FCF) should note that the company generated more than $ 200 million in FCF for the first half of the year.
While investors can expect a significant portion of this growth to come from the public sector, the company is also making significant inroads into the private sector. Specifically, Palantir announced that the number of commercial customers increased by 32% compared to the previous quarter.
Another reason investors are skeptical of PLTR shares is the number of insider selling that has taken place since the stock began trading publicly.
I tend to follow the mantra that there are a million reasons people sell a stock, but it’s always hard to ignore how many insider sells have taken place.
On the company’s last earnings call, CFO Dave Glazer reiterated a point he made in the previous earnings report. This is that a significant part of the sale was due to option expirations that will take place at the end of 2021.
PLTR action appears to be a buy
I’ve been on the fence about Palantir for most of the year. However, the company’s strong ties to the US defense industry are likely to give PLTR stock a boost in revenue in the short term.
The comparison I’m going to use is as follows: Amazon (NASDAQ:AMZN) isn’t limited to e-commerce, but it is the company’s expertise in this area that has contributed the most to the 81% rise in the share since March 2020.
Likewise, Palantir is not only about her contacts within the defense industry, but it is this expertise that enables her to generate income at a time when this skill set will be invaluable.
While I’m not betting the PLTR stock will see an 81% price gain, I do expect the stock to retest and break above recent highs in the coming months.
As of publication date, Chris Markoch did not hold (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, submitted to InvestorPlace.com Publication guidelines.
Chris Markoch is a freelance financial writer who has covered the market for seven years. He has been writing for InvestorPlace since 2019.