Palantir Did Not Win the FAA Contract for SMART. Time to Buy the Stock Anyway?

The Federal Aviation Administration (FAA) just announced plans to roll out a new AI-based system it calls Strategic Management of Airspace, Routes, and Trajectories, or SMART.

Consequently, analysts at firms such as Rosenblatt turned their attention to Palantir Technologies (NASDAQ: PLTR), believing SMART could become an additional revenue source for the software-as-a-service (SaaS) stock. Palantir did not win the contract, but investors likely would have had trouble benefiting from this new business line -- here's why.

Image source: Getty Images.

Palantir and SMART

Admittedly, Palantir was well positioned to implement a system like SMART. The company's tools could have improved SMART by making air traffic management more efficient and averting potential problems. Nonetheless, despite those attributes, the 12-year, $875 million deal went to a company called Air Space Intelligence.

Unfortunately, even if Palantir had won the contract, investors faced one critical obstacle -- the current state of Palantir. The company's stock trades at a P/E ratio of 164, and even its forward P/E reduces the earnings multiple to just 119. When also factoring in a sales multiple of 80 and a price-to-book value ratio of 47, the stock appears priced to perfection by just about every measure.

Also, while its growth is robust, it may not be enough to justify its valuation premium. In the first half of 2026, its nearly $3.6 billion in revenue increased by 89% compared with the same period in 2025. Also, it earned $1.9 billion during the same period compared with $541 million in the same year-ago time frame.

Palantir's stock stood still amid the lost contract. However, since the market has bid its stock price into the stratosphere, bad news from a variety of sources could still trigger selling. Knowing that, investors may want to think twice about buying the stock.

Moving forward with Palantir

Given its valuation, Palantir shareholders would have likely not benefited from the SMART contract even if the FAA had awarded it to Palantir. Indeed, winning the SMART contract would likely have been yet another validation of the power of Palantir's software.

Unfortunately, Palantir's growth has become a known quantity, and the stock supports valuations that confirm its growth potential. Its high valuation increases the odds that this potential revenue source will not help Palantir stock, and investors could face a sell-off should any bad news spook them.

Hence, even though Palantir lost the contract, it is likely not a loss for investors.

Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.