Shares of electric-car maker Tesla (NASDAQ:TSLA) have been roaring higher recently. The stock has doubled in the last six months as investors cheer the company's rising Model 3 sales and the completion of a new factory in under a year's time.

Following the company's better-than-expected fourth-quarter deliveries and the beginning of Shanghai-made Model 3 deliveries to customers in China, one analyst is betting the automaker's stock can keep moving higher over the next 12 months.

Tesla's Models S, 3, X, and Y

Image source: Tesla.

The path to $556

Argus Research analyst Bill Selesky boosted his price target from $396 to $556 on Tuesday, citing Tesla's record 112,000 deliveries in Q4, an improved outlook for "economies of scale in 2020 production and delivery results," and notable momentum at the company's new factory in China. Growth in Tesla's energy business will help, too, Selesky believes.

The analyst now expects Tesla's earnings per share this year to come in at $5.96, up from a previous estimate of $4.40.

The company has definitely seen a big increase in production and deliveries -- enough to likely lead to significantly improved economies of scale in 2020. Tesla's fourth-quarter deliveries of 112,000 helped the company wrap up the year with total 2019 deliveries up 50% year over year, highlighting the electric-car maker's impressive growth. Further, Tesla said in its Jan. 3 update on production and deliveries that its Shanghai-based factory had already produced nearly 1,000 vehicles and had started deliveries. "We have also demonstrated production run-rate capability of greater than 3,000 units per week, excluding local battery pack production which began in late December," Tesla added. 

Is Tesla stock too hot?

Still, investors should consider whether a $556 12-month price target actually makes sense.

Assuming Tesla can achieve Selesky's forecast of $5.96 in earnings per share, the analyst's price target implies the automaker will trade at 93 times next year's earnings. This valuation, therefore, suggests that Tesla can keep growing at rapid rates for years to come.

The electric-car maker's recent strong growth, its successful launch of a China-based factory to better serve the world's largest auto market, and Tesla's plans to begin deliveries of its upcoming Model Y crossover in 2020 do suggest more sharp growth is on the way for the electric-car maker. However, investors should recognize that a $556 price target requires a degree of speculation from investors, betting that the company's lead in the electric-car market can be sustained over the long haul.

To Selesky's credit, Tesla's recent sales momentum and the company's swing from negative to positive free cash flow on a trailing-12-month basis make a good case for the scalability of the automaker's business as production and deliveries increase. But if Tesla hits any detours, or if competition intensifies more rapidly than anticipated, investors may reassess their rosy view for the company -- and Selesky's price target could prove to be further away than it might seem today.

Of course, Tesla shareholders may not want to hit the sell button just as the automaker is demonstrating great business execution. But they should at least recognize that the company will need to deliver incredible results in 2020 to justify further stock price appreciation throughout the year.