What happened
Shares of Palantir (PLTR 2.44%) are sinking again in this week's trading. Heading into this Friday's market open, the big-data specialist's stock was down roughly 8.4% from last week's close, according to data from S&P Global Market Intelligence.
Facing high inflation, looming interest rate hikes, and ongoing developments related to Russia's invasion of Ukraine, risk-off sentiment has gripped the market lately and led to big pullbacks for companies trading at growth-dependent valuations. While there aren't any new business-specific developments pushing Palantir's valuation lower, the company's share price is participating in the broader market's sell-off.
Image source: Getty Images.
So what
Russia's invasion of Ukraine has added to bearish market pressures this year, and ongoing developments related to the ordeal prompted new rounds of volatility this week. Russia moved to cut off gas deliveries to Bulgaria and Poland this week following the countries' opting not to comply with the demand that energy supplies be paid for in rubles, and Russian officials also made comments indicating that military actions in its war with Ukraine are in danger of escalating significantly.
In addition to those risk factors, the market has continued to become increasingly concerned about the impact of inflation and the interest rate hikes that will likely be implemented in hopes of curtailing it. The combination of geopolitical and macroeconomic conditions is leading to big sell-offs for Palantir stock this week, and it looks as if things could get worse before they get better.
Now what
The U.S. Department of Commerce reported on Thursday that gross domestic product (GDP) had fallen 1.4% year over year in the first quarter. The unexpected decline in GDP could prompt more volatility for the market in the near term, and it points up a potentially troubling macroeconomic dynamic. Some analysts have raised concerns that the Federal Reserve's plan to substantially raise interest rates this year is likely to trigger a recession, but major rate hikes appear to be necessary in order to stem inflation. With the U.S. economy already contracting despite the Fed only having raised rates by 25 basis points in March and inflation still running hot, there are worrying dynamics at play that could translate into tough times for growth stocks and the economy at large.
Adding another potential near-term bearish catalyst for Palantir stock, Amazon delivered a much wider-than-expected loss when it reported Q1 earnings results yesterday. As one of the most closely followed growth stocks on the market, Amazon often has ripple effects across the broader market, and its recent earnings release could create another negative near-term catalyst for Palantir stock.
After dramatic pullbacks over the last year, Palantir now has a market capitalization of roughly $22.2 billion and is valued at approximately 11 times this year's expected sales and 58 times expected earnings. While there's still a promising long-term demand outlook for its specialized data analytics services, the company's forward-looking valuation sets the stage for more turbulence in the near term if bearish momentum continues to shape the market at large.
