What happened

January was another strong month for Palantir Technologies (NYSE:PLTR), with the stock climbing 49.4%, according to data provided by S&P Global Market Intelligence. The shares are now up more than 250% since the company's late-September public debut.

So what

Palantir has been a red-hot stock since its debut, with investors excited about the company's well-regarded data analytics technology and high-profile backers including executive chairman Peter Thiel. Palantir works with a number of government and commercial customers, but is best known for its work with known for its work with government spy agencies and its reported role in the capture of Osama bin Laden.

PLTR Chart

PLTR data by YCharts

In January, the company announced a partnership with utility PG&E to use its analytics software to help improve electric operations and keep California's fragile electric grid up and running. It also held a demo day to explain the power and potential of its software and technology.

But the potential is arguably already priced in, with Palantir trading at more than 50 times expected 2020 sales. And it is going to take dozens of deals similar to the one reached with PG&E to justify that sort of multiple.

Worth noting is that most of the gains for the month came in late January, around the time the Reddit community WallStreetBets ramped up its campaign against prominent short-sellers including Citron Research. Palantir was among the companies targeted by Citron as a short, with the investment firm writing back in November that Palantir is "no longer a stock but a full casino." 

Illustration of a secure cloud

Image source: Getty Images.

Now what

There's no questioning the potential of Palantir's technology, but it is equally difficult to justify the company's current valuation. The market's perception of Palantir's worth has changed dramatically in the few months since it went public. Perhaps part of that is the company's failure to adequately get its story out prior to its listing, but it appears to me that it is also due to investor excitement getting ahead of fundamentals.

That's not meant as a prediction the stock will crash lower anytime soon. Stocks can seemingly defy gravity for extended periods of time, and Palantir can grow into its valuation. But it is meant as a word of caution for investors considering buying in now: Palantir's initial run as a public company has been volatile, and it appears likely that it won't settle down anytime soon.

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.