Palantir shares could soar if it’s awarded NHS contract

Palantir (NYSE: PLTR) shares are down 77% from their $35 high of January 2021, 59% in the past six months, and 15% over the past five days.

And at $7.82, it appears on the surface an unfair victim of the wider market downturn. Revenue rose by 31% year-over-year in Q1 to $446.4 million, and its customer base has increased by 86% over the past year.

While revenue is only expected to grow by another 5.4% quarter-over-quarter in Q2, it expects annual revenue growth of 30% or more through 2025.

And winning an upcoming NHS contract could supercharge this ambition.

Palantir share price: NHS contract

Palantir is spending the next few months bidding for a five-year £360 million contract to develop and maintain the proposed NHS Federated Data Platform (FDP). The contract is due to be awarded in November.

This data tool will be designed to integrate all patient data across the NHS to help doctors, nurses, managers, and politicians make more effective real-time decisions. It will include areas as diverse as population health and person insight, care coordination, elective recovery, vaccines and immunization, and even supply chain.

In other words, Palantir’s software would become the underlying operating system for the National Health Service to manage the medical data of every patient in England. As Phil Booth, founder of health data advocacy group medConfidential says ‘this would be the veins through which patient data would flow, very much the operating system for data in the NHS.’

Palantir has recently hired two senior NHS officials: Indra Joshi, the health service’s former head of artificial intelligence, and Harjeet Dhaliwal, former deputy NHS England data chief, who was partially responsible for both the creation of the FDP contract and Palantir’s previous contracts with the NHS.

And the big data company was already embedded into the health service’s IT systems during the covid-19 pandemic, managing ventilator and PPE equipment, the vaccination roll-out, and assessing the 6 million-strong patient backlog waiting for elective care.

Is Palantir likely to win the contract?

The Financial Times quoted an insider arguing that ‘this is a must-win deal for them. This is a five-year contract, with an option for an extension for two years…it’s really £1bn over 10 years. Once Palantir is in, how are you going to remove them?’

And in an information pack provided to potential suppliers by the NHS, Palantir’s tech was lauded as ‘delivering huge benefits and was critical to the success of the vaccination and PPE programmes… has the potential to deliver £3.6bn benefits over 10 years.’

Compared to the test-and-trace disaster, Palantir has already delivered on its promises.

On the other hand, the CIA-backed company has been criticised for both its work on ICE detentions at the Mexico border, founder Peter Thiel’s links to Donald Trump, and intimate ties to national security agencies. Further, many see the move as a step towards further privatisation of the NHS.

Moreover, the potential expansion is being fiercely contested by privacy activists, who are fairly concerned that one US tech company would control all UK medical data. But under licence agreements of previous contracts between Palantir and the NHS, both claim ‘the data control stays with the owner of the data, not with Palantir.’

However, one key risk remains unanswered. If Palantir were to collapse, or could no longer provide the service, it’s unclear how the NHS could unwind itself from the provider.

In addition, the centralised nature of the proposed contract would make it a prime target for hackers. While the 2017 WannaCry virus infected multiple individual NHS trusts, a similar future successful attack could potentially infect the entire system and send the healthcare service into meltdown.

But politically, Palantir enjoys strong support. In April 2020, the company began providing free support to both Downing Street and the NHS, offering 45 staff to help with pandemic policymaking. New Statesman analysis suggests this cost the company £88,000 a week in wage bills.

Palantir was paid just £1 for the contract, which crucially did not go to public tender. The company was then rapidly granted a £1 million contract extension, then a £23 million two-year deal in December 2020.

And in addition to its current NHS contracts, it also now processes national security data for both the Ministry of Defence and the Cabinet Office. And if it wins, as seems likely, Palantir could become the government’s go-to contractor for all big-data analysis needs.

At just $7.82, Palantir’s share price represents a buying opportunity for long-term investors with a healthy risk appetite.

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*Based on revenue excluding FX (published financial statements, June 2021).