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In a note to clients on Monday, William Blair claimed that most Palantir Technologies Inc (NYSE:PLTR) investors missed the news that Fast Radius Inc (NASDAQ:FSRD) filed for bankruptcy.
Fast Radius is a startup provider of advanced manufacturing services based in Chicago and is one of the 21 publicly traded companies for which Palantir provided SPAC PIPE equity funding in connection with the recipients of the funding signing multiyear software license agreements with Palantir, said William Blair analysts, who have an Underperform rating on Palantir shares.
“In May 2021, Fast Radius entered a $45 million/six-year software agreement with Palantir in connection with Palantir, investing $20 million for 2 million shares of Fast Radius’s equity. As a result, there is the potential that Fast Radius’s estimated $9 million annual revenue contribution goes away if the company stops paying Palantir,” explained the analysts.
“Beyond Fast Radius, there is the potential for downside pressure if other strategic investments falter. As of Friday’s close, according to our calculations, the average strategic investment is down 82% from Palantir’s purchase price. Most of these strategic investment contracts contain termination provisions. Palantir recognized $28.1 million in revenue from its strategic investments in the September quarter, down from $39.2 million in the March quarter. Overall, revenue from these strategic investments composes roughly 5% of total revenue. We believe that the churn of such strategic revenue could be detrimental to Palantir’s profit margins,” they added.
As a result, William Blair is incrementally negative on Palantir, and they expect Palantir shares to trend lower over the next 12 months on growth and margin pressure, with a potential downside to $5 to $6 per share.
