What happened

Data analytics company Palantir Technologies (NYSE:PLTR) had an amazing November, up more than 150% despite no real needle-moving news. The stock is losing some of that altitude on Wednesday, down more than 15% at the open after a Wall Street analyst said it has risen too far, too fast.

So what

Palantir's brief history as a publicly traded company has not been boring, at least. The at-times controversial data company co-founded by Peter Theil went public in late September, and has been soaring in the weeks since.

Illustration of a secure cloud.

Image source: Getty Images.

Morgan Stanley analyst Keith Weiss in a note Wednesday tapped the brakes on the stock, downgrading it and assigning it a $17 price target. Weiss notes that the stock has soared despite "very little change in the fundamental story," and said the risk/reward at this valuation "shifts decidedly negative for the shares."

It's hard to find a perfect comparison for Palantir, but the stock looks rich no matter what comparison you make. Palantir today trades at more than 40 times expected 2020 sales and 33 times Weiss' 2022 sales estimate. Other government services companies tend to trade at two to three times sales, and a broader basket of software-as-a-service stocks trade at an average of about half the multiple Palantir commands.

Now what

Valuation has historically been a lousy reason to sell a growth stock, but the question surrounding Palantir is how fast it will be able to grow. The company has been around since 2003 and is only hoping to hit $1 billion in sales this year. Its technology is highly regarded in military circles, but there is only so much new business out there on the defense side.

No one, not even noted short-seller Citron Research, thinks this stock is going to zero. But it's fair to say a lot of hoped-for future growth is already priced in. At some point, that momentum tends to fade, and that's what is happening to Palantir shares on Wednesday morning.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.