What happened

Shares of Tesla (NASDAQ:TSLA) jumped on Tuesday. The stock is up 4.6% as of noon EST, building on yesterday's gain and bringing the stock's total gain this week to about 11%.

The growth stock's rise today is likely due to a combination of another bullish day in the overall market and yet another analyst releasing optimistic commentary about Tesla stock.

Tesla vehicles

Image source: Tesla.

So what

Morgan Stanley analyst Adam Jonas increased his 12-month price target for Tesla shares from $810 to $880 on Tuesday, reiterating an overweight rating -- similar to a buy rating. Following the company's fourth-quarter and full-year update and management's discussion of its future plans, Jonas said he now expects the company to more aggressively build out its production capacity than he was previously anticipating. 

Of course, the overall market's sharp move higher on Tuesday likely helped give Tesla shares a boost as well. The S&P 500 and Nasdaq Composite, for instance, are up 1.8% and 1.6%, respectively, as of this writing.

Now what

While 2021 does look like it will be a great year for Tesla's business, investors should exercise caution when it comes to their expectations for the automaker's stock. While shares could certainly keep up their momentum, the stock is notably far more expensive today than it was even just six months ago. Tesla now trades at 31 times sales, up from about 11 times sales last August. This means the stock's valuation has priced in exceptional execution and extremely strong business growth for years to come.

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.