Please ensure Javascript is enabled for purposes of website accessibility

Why Palantir Stock Is Sinking Today

By Keith Noonan – Jan 10, 2022 at 2:41PM

Key Points

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The big data stock is wilting amid signs of rising macroeconomic pressures.

What happened

Palantir (PLTR 2.75%) stock is losing ground again on Monday. The company's share price was down roughly 3% as of 2 p.m. ET and had been down by as much as 7.3% in the daily session.

Meanwhile, the S&P 500 index was down roughly 1%, and the even more tech-heavy Nasdaq Composite index was down roughly 1.2% as of 2 p.m. ET. Palantir has gotten hit hard as the market has become more cautious about heavily growth-dependent stocks, and more volatility could be in the cards if risk-heavy investments continue to fall out of favor. 

Person using laptop showing futuristic interface.

Image source: Getty Images.

So what

There doesn't appear to be any business-specific news behind Palantir's stock slide today, but investor appetite for growth stocks is waning amid shifting macroeconomic conditions. Comments and transcripts from the Federal Reserve's meeting in December indicate that the central bank plans to significantly reduce its bond purchases and raise interest rates this year. The Fed may also reduce its holdings in Treasury bonds and mortgage-backed securities. Monday saw investors weighing these looming pressures in addition to the U.S. 10-year Treasury bond yield hitting a two-year high of 1.8%.

All of these factors point to a less favorable backdrop for growth stocks. Rising bond yields mean that investors are able to get more substantial returns with relatively little risk, and rising interest rates tend to temper investor enthusiasm and mean that it's more expensive for companies to fund growth initiatives with debt. 

Now what

Palantir stock is now down roughly 36.5% over the past year, it and trades down roughly 64% from the lifetime high that it hit last January.

PLTR Chart

PLTR data by YCharts

Even after the pullback, Palantir has a market capitalization of roughly $32 billion and is valued at approximately 16 times this year's expected sales. On the other hand, the company has built an intriguing position in the data analytics services industry, and it anticipates being able to grow sales at a greater than 30% annual rate through 2025. For risk-tolerant investors, the recent sell-offs could present a worthwhile entry point, but the stock could see more volatile trading in conjunction with market momentum and macroeconomic shifts.  

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns and recommends Palantir Technologies Inc. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.