Palantir Stock got a lift from an Army contract. The bears say not so fast.

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Palantir Technologies

gets a bit of perspective from the streets on its announcement yesterday about the US military’s work to modernize the way it handles data and analytics.

Here’s the situation: In February 2020, the military announced that Palantir (PLTR) and

BAE systems

(BAESY) was named a competitor in a seven-year, $ 823 million program to upgrade and replace components of the Army’s Distributed Common Ground System. Six companies had originally submitted proposals for the program.

Palantir now says he was selected to provide “the database and analysis” for the program.

In June 2020, BAE announced that it had received a first order under the program, sometimes referred to as Capability Drop 2, but Palantir has apparently won the battle between the two companies and will be the sole supplier going forward. The implication is that BAE has already received part of the contract funds, but Palantir believes he will get the rest. BAE did not immediately respond to a request for comment.

Palantir said its software will be used “to support Army Intelligence users around the world with a globally federated intelligence data fabric and analysis platform spanning multiple security classifications.”

Palantir is still a controversial move, and this announcement underscores that. Two analysts with bearish positions on the stock issued notes on Wednesday, raising questions about the project in particular and the strength of Palantir’s defense activity in general.

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Citi analyst Tyler Radke notes that the contract is structured as an “indefinite delivery, indefinite quantity” contract, which he says is “notoriously difficult to quantify,” and says the total value of the transaction likely also includes purchases of equipment, sensors and peripherals that would go to other suppliers. He also thinks the contract is probably already reflected in the guidelines.

Meanwhile, Radke writes that his tracking of Palantir’s federal contracts suggests “very light signing activity” during the September quarter. Radke writes that he would sell the stock on Army Contract News, “because we don’t expect the contract to significantly influence forward-looking estimates.” Radke maintains its sell rating and its target price of $ 18 on the stock.

Likewise, William Blair analyst Kamil Mielczarek reiterated his underperformance rating on Palantir shares and claims that a move of more than 10% of the stock Tuesday after office hours was an overreaction. . On the one hand, he notes that the White House budget only requested $ 92.6 million for the government’s fiscal year 2022 program, compared to $ 198 million for fiscal year 2021, with only about $ 22 million spent on software.

Meanwhile, like Radke, Mielczarek believes Palantir’s government business was light in the third quarter. “While Palantir won several expansions, we did not land any contracts for new work,” he writes.

Palantir stock is up 4.7% to 24.30.

Write to Eric J. Savitz at [email protected]