Shares of Tesla are roaring higher — but some are worried Elon Musk's electric-car maker might be a speculative bubble that sometimes occurs in financial markets, especially near the end of bull markets. Rising more than 110% in 2020 alone, some believe Tesla has become unmoored from its fundamentals, fueled by short covering and the fear of missing out among investors not holding the stock. "Tesla has gone parabolic," said Matt Maley, chief market strategist at Miller Tabak. "This is taking Tesla well above a level that would be supported by its current fundamentals. … The stock is going to get absolutely clobbered at some point before long."

Tesla shares surged more than 13% on Tuesday, at one point trading above $900 for the first time, and analysts still can't keep up with the run. The average 12-month price target of analysts is $493, according to FactSet. That new target, which is where analysts expect the stock to be a year from now, is more than 40% below where the stock closed on Tuesday. "When the stock market bubble implodes, it will have been started by the surge in Tesla shares beyond speculative zeal," former presidential candidate Ralph Nader wrote on Twitter last month amid the run. Tweet

Flashbacks

Some investors are seeing resemblance between the unstoppable enthusiasm over Tesla and the bitcoin bubble a few years ago. After bitcoin's unprecedented run to nearly $20,000 a piece in 2017, the cryptocurrency crashed a whopping 65% in a span of just one month. By the end of 2018, bitcoin fell below $4,000, an 80% drop from its peak. tweet Others are getting flashbacks to the dot-com bubble in early 2000s, when internet stocks exploded and eventually collapsed, shedding nearly 80% of value within seven months. In December 1999 before the bursting of the tech bubble, Amazon's valuation hit more than 50 times its IPO price. Right now, Tesla is trading at about 98 times forward earnings, according to FactSet.

Tesla vs. Volkswagen

Perhaps the most glaring parallel could be drawn between Tesla today and Volkswagen in 2008. Including Monday's surge in Tesla's stock, investors betting against it have lost more than $8 billion since the beginning of the year, according to data from S3 Partners.

Short sellers are investors who borrow shares from a bank and then sell them, hoping the stock will go down. If it does, then the short sellers buy them back at lower prices and return them to the bank, profiting on the difference. Musk's Tesla has more investors betting against the company than any other U.S. stock, according to S3. If enough short sellers are forced to cover their shorts and buy back the stock at the same time, it can create higher demand and itself drive the stock price even higher, a phenomenon also known as "a short squeeze." Similar moves triggered by short selling happened to Volkswagen in 2008 after Porsche took a stake in the company, catching investors betting against the stock off guard. At that time, the short sellers notoriously pushed the German automaker to become the world's most valuable company. The stock briefly topped Exxon Mobil's $343 billion market capitalization as short sellers paid high amounts, desperate to get out of their positions.

"Watch out Tesla believers"

Tesla has had only a handful of profitable quarters in its history and it has never been profitable on an annual basis.