What’s Driving The New Tesla Bulls?

12/16/13 10:19AM EST

Whats Driving The New Tesla Bulls Whats Driving The New Tesla Bulls?

Image via Flickr/ Steve Jurvetson

Tesla Motors Inc (NASDAQ:TSLA) stock is once again a hot commodity on Wall Street. The company’s shares have risen by more than 7 percent in the last five days and this morning’s pre-market number show that there is little chance of that run slowing on today’s market. What’s driving the new surge in Tesla shares, and is the run sustainable?

The answer to that question is difficult to find. There are many moving parts weighing on the Tesla Motors Inc (NASDAQ:TSLA) stock price. One thing is clear, however, Tesla shares are not driven by fundamentals, which haven’t changed in the last week, they’re pushed by expectation. That may have been altered in recent days.

Tesla Expectations Rally

There is little doubt that the potential of Tesla Motors Inc (NASDAQ:TSLA) is huge. There is doubt about the ability of the company to reach that potential. Several factors have spurred shares higher in recent days as evidence of the company heading in a positive direction built up.

Several analysts have boosted their projections for the company in recent days. Morgan Stanley and Wedbush have both recommended the stock in the last week, and investors appear to be listening to them.

On top of the recommendations of analysts sits the comments from the company itself. The firm’s chief designer Franz von Holzhauzen said that Tesla is on track to reveal its mass market vehicle at the Detroit car show in 2015. Investors are banking on the success of that vehicle, and any news on its imposing production schedule is welcomed.

Tesla Recovery Is Not Underway

The recent bump in the price of Tesla Motors Inc (NASDAQ:TSLA) may be seen as the start of a recovery to previous highs, but investors should not fool themselves. The recent rise in share prices is not a recovery, it’s a movement of its own, and it should be judged as such.

Tesla has nothing to recover from. The company may have suffered a small amount of damage from the repeated reports of fires in the Model S, but the company’s stock suffered from something else: overvaluation. Tesla Motors is not going to “recover” to $200 because the stock was not worth that number to begin with.

The current increase in the price of Tesla stock is not limited by the $200 price tag, however. If the company’s fundamentals change in the coming weeks, or expectations continue to jump higher, shares could pass previous highs. Some analysts are expecting them to do just that.

Tesla Motors Inc (NASDAQ:TSLA) is valued far beyond any justification its financials can offer. The company’s shares are on the rise once again, but that doesn’t mean they’ll stay that way for any length of time. Real investors in the electric car maker will ignore the charts. Everyone else will continue their gamble on the company, whether is pays off is more up to luck than anything else at this stage.

Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted.