What happened
The stock market has gotten off to a rocky start in 2022, and Tuesday delivered another day of sell-offs and a 1.8% drop for the S&P 500 index. Amid the turbulent backdrop, Palantir (PLTR -2.84%) stock closed out the day down 6.5%.
There wasn't any company-specific news driving the big-data company's most recent slide, but growth-dependent technology stocks have had a rough go of things lately due to a multitude of macroeconomic risk factors, and these were once again highlighted in Tuesday's trading. With Treasury bond yields hitting a two-year high in the session, investors continued to adjust in preparation for a more challenging environment for growth stocks, and Palantir lost ground.
Image source: Getty Images.
So what
The yield on 10-year U.S. Treasury bonds hit 1.874% today, setting a two-year high mark and rattling technology stocks. In addition to rising bond yields paving the way for improved returns on very little risk, investors have had a multitude of other macroeconomic conditions to consider.
Growth stocks have been particularly hard hit as the market has weighed risks posed by weak economic data, the Fed's plans to raise interest rates, and the curtailing of other stimulus initiatives that have helped power bullish momentum for the stock market. Palantir has been something of a battleground stock in the cloud software space, and recent trends have seen bulls taking a beating.
Now what
After today's sell-off, Palantir stock is down roughly 67% from the high that it hit last January. The company now has a market capitalization of roughly $30 billion and is valued at approximately 15 times this year's expected sales.
Palantir has been building business among public and private sector customers at an impressive clip, but the market has been moving away from companies that trade at high price-to-sales multiples and rely on debt or stock to fund operations. The big-data specialist posted $119 million in adjusted free cash flow in the third quarter, but it's also been relying on issuing stock for employee compensation, and the company posted a net loss of $102.1 million in the period.
Palantir has an intriguing position in a service niche that could see huge growth over the long term, but investors should approach the stock with their personal appetite for risk in mind. While recent sell-offs may have presented a worthwhile buying opportunity for risk-tolerant investors, it's probably fair to say the stock won't be a great fit for everyone.
