What Happened With Tesla Stock
Tesla's stock has more than tripled in value since last June and its valuation at current levels is "quite frothy," Nelson said.
Specifically, the stock is trading at a multiple of more than 50 times 2021 estimates which already gives the electric automaker "plenty of credit" for future growth.
Much of the recent gains could also be the result of investors covering their short position which lends a "coiled spring effect" to the stock, he said. In fact, short interest has come down from around 20% to 15% over the past few months
Why It's Important
Tesla's stock appreciation may have also established lofty expectations, especially ahead of its earnings report next Wednesday, the analyst said. It's difficult to imagine what the company can show or say in its report to support further upside given the run-up so far.
Meanwhile, other analysts view Tesla's stock with a different lens that makes it one of the more hotly debated names.
Most recently, New Street Research said Tesla's stock is heading to $800 and cited three reasons during a Fox Business interview: Tesla makes good cars that no one else can copy, demand for its cars are really strong and Tesla can make a profit.
CFRA has a $400 price target on Tesla.
TSLA Price Action
Tesla shares were trading down 1.74% to 562.22 at time of publication.