What happened

Shares of Tesla (NASDAQ:TSLA) jumped sharply on Wednesday, rising 4.9% by the time the market closed. The stock's gain today adds to a bullish run over the last three months, and it follows optimistic commentary from an analyst Tuesday afternoon. 

So what

Tesla stock could hit $556 within 12 months, Argus Research analyst Bill Selesky said in a note to investors on Tuesday. That price target is the highest on the Street -- and it's up from his previous 12-month price target of $396. As of the closing price of $492.14 on Wednesday, the price target implies 13% upside.

A chart showing a stock price moving higher

Image source: Getty Images.

Selesky cited better-than-expected fourth-quarter deliveries and the rapid construction and subsequent start of Model 3 production at Tesla's factory in China as key reasons for his optimism. 

Notably, Tesla delivered a record 112,000 vehicles in Q4, which were 6,000 more than analysts expected. The company also said it had "demonstrated production run-rate capability of greater than 3,000 units per week [at our new factory in China], excluding local battery pack production which began in late December." 

Now what

Shares of Tesla have been surging in recent months as it became clear that the electric-car company was making substantial progress on its factory in China. The automaker started delivering China-made Model 3 units to employees at the end of December, and it began deliveries of these vehicles to customers in the market this week, serving as a catalyst for the stock's rise earlier this week. In total, shares are up 11% this week.

Now Tesla will need to follow through on investors' high expectations and quickly ramp up production and deliveries in China.

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.