Just when it seemed the hype for Tesla (NASDAQ:TSLA) stock today couldn't get any greater, Piper Sandler analyst Alexander Potter more than doubled his 12-month price target for the electric car maker's stock. The new target is a Street high for Tesla shares, implying about 50% upside.

Potter's optimism for the stock follows an incredible 500% gain for shares over the past 12 months and a 60% boost over the last 30 days alone. Can shares really keep rising over the next year?

Here's a closer look at this analyst's bullish view for Tesla stock -- and what investors should make of it.

Tesla Model S interior seen from the front passenger side.

Model S. Image source: The Motley Fool.

The path to $2,322

Potter's new 12-month price target? $2,322. This is up from a previous target of $939 and implies huge upside from the company's current share price of $1,500 -- a price that is notably up from about $250 just 12 months ago.

The analyst justifies this wild outlook for Tesla stock with a bullish view for the company's potential in software. Potter contends that the automaker will be able to increase the price of the driver-assist software in its vehicles from $9,000 today to $40,000 in the future. A subscription version of the software could cost even more, he believes. This would ultimately translate to a high-margin software business that could eventually command a 90% gross profit margin.

All of this could put Tesla's overall business operating margins in the mid-20s in 20 years, Potter believes.

This success in software could also conceivably enable Tesla to sell its vehicles at (or even below) cost, Potter says.

Tesla CEO Elon Musk has said the price of its vehicle software will increase over time, so much so that its vehicles may become appreciating assets. Potter seems just as bullish as the electric-car maker's outspoken CEO on this matter.

The big risk

Of course, the biggest risk to these assumptions is whether Tesla can actually deliver on its promise to provide an over-the-air software update to its vehicles that will enable them to drive themselves.

Tesla hopes to eventually launch an autonomous taxi service made up of customer vehicles that can be deployed into the fleet when customers aren't using them. Tesla would, in turn, share revenue with these customers. This is ultimately why the driver-assist software we know today could command a $40,000 price tag in 20 years.

But here's the catch: There's no certainty that Tesla can actually pull this off. The company even warns on its website that its self-driving features are "dependent on achieving reliability far in excess of human drivers as demonstrated by billions of miles of experience, as well as regulatory approval, which may take longer in some jurisdictions."

In short, while Tesla's driver-assist technology has made impressive progress, it's still far from enabling a fleet of self-driving taxis -- and investors should consider this risk carefully.