Why Palantir Stock Is Sinking Today
Key Points
Palantir stock rose yesterday, but it's slipping today in response to geopolitical risks.
Investors are worried about fallout from the U.S. and Israel's war with Iran.
Palantir's leadership in defense-industry software has helped the stock be resilient, but shares could still face pressures from macroeconomic and geopolitical risks.
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After strong gains in yesterday's session, Palantir (NASDAQ: PLTR) stock is losing ground in Tuesday's trading. The company's share price was down 1.4% as of 11:45 a.m. ET. Meanwhile, the S&P 500's level had declined by 1.6%, and the Nasdaq Composite's level was off 1.8%. The stock had been down as much as 4.8% earlier in the day.
New developments in the U.S. and Israel's conflict with Iran have roiled global markets today, and Palantir's share price is being pressured. While the software specialist has strong positions in the defense industry, it's not completely immune to bearish trading connected to geopolitical volatility.
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Palantir stock sinks as war concerns intensify
Despite the U.S. and Israel conducting joint strikes on Iran over the weekend and Iran responding with missile strikes of its own, Palantir closed out yesterday's trading solidly in the green. The stock is giving up some of those gains today as investors weigh the potential adverse impacts of a sustained conflict.
Iran has closed the Strait of Hormuz, a crucial shipping region that connects the Persian Gulf with the Arabian Sea and allows for oil and other exports to be shipped around the world. As a result, oil prices are rising quickly -- and investors are adopting more cautious positioning.
What's next for Palantir stock?
With a market capitalization of roughly $342 billion, Palantir is trading at approximately 47 times this year's expected sales and 108 times this year's expected earnings. The company has one of the most growth-dependent valuations of any major stock on the market.
Despite its valuation profile, Palantir stock has held up well amid geopolitical pressures impacting the broader market. The company's role in providing artificial intelligence (AI) and analytics software services to U.S. defense agencies has helped buttress its valuation, but it could still face pressures if bearish sentiment surrounding stocks intensifies. If conflict in the Middle East causes inflation to run higher and leads to hawkish developments on interest rate policy, Palantir stock could quickly see stronger downside momentum.
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Keith Noonan 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.
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